Harper Company is contemplating the purchase of a machine capable of performing certain operations that are now performed manually.
The machine will cost $5,000, and it will last for five years.
At the end of the five-year period, the machine will have a zero scrap value. Use of the machine will reduce labor costs by $1,800 per year.
Harper Company requires a minimum pretax return of 20% on all investment projects?
Should the machine be purchased? (Use the Net Present Value calculation in your analysis)© BrainMass Inc. brainmass.com September 22, 2018, 6:05 am ad1c9bdddf - https://brainmass.com/business/capital-budgeting/net-present-value-67013
We need to calculate the PV of the cash flows and then find the NPV to decide if the machine should be purchased.
Since we have a pre tax rate for ...
The solution explains how the calculate the cash flows of a project and then use the NPC for accept/reject decision