Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $326,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,760,000. The cost of the machine will decline by $111,000 per year until it reaches $1,205,000, where it will remain.
If your required return is 13 percent, calculate the NPV today.
If your required return is 13 percent, calculate the NPV for the following years. Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Should you purchase the machine?
If so, when should you purchase it?
Today
One year from now
Two years from now