Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $485000 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 $2.95 million. The cost of the machine will decline by $315,000 per year until it reaches $1.375 million, where it will remain.If your required return is 8 percent, calculate the NPVIf your required return is 8 percent, calculate the NPV if you wait to purchase the machine until the indicated year. MHいnew machine will increase Cash Flow by $485,000 perYour Company is deciding whether to invest in a new machine. Thethe technology used in the machine has a 10 year lifear. You believe.In other words10 years fromtoday. The machine is currently priced at $2.95 Million. The cost of theMachine will decline by $315,000 per year until it reaches $1.375 million,where it will remain.If your required return is 8 percent, Calculate the NPVtoday.NPV=-Initial Investment + Annual Cash Flow x (1-(1+r)-2950,000+485000 × (1-(1+.08)^-10)=08304389.48xIf your require retum is 8 percent, Calculate the NPV ifyou wait to purchase the machine until the indicated year."Annvalinkument 315,000.10.

According to the analysis, delaying until the machine's price drops can greatly raise the…

Answered: MH い new machine will increase Cash…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 5P

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Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $485000 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 $2.95 million. The cost of the machine will decline by $315,000 per year until it reaches $1.375 million, where it will remain. If your required return is 8 percent, calculate the NPV If your required return is 8 percent, calculate the NPV if you wait to purchase the machine until the indicated year.