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Project Evaluation - Kinky Copies

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Please help determine the solution as to why or why not Kinky should buy the machine. Please break it down so that it presents a clear understanding.

Project evaluation. Kinky Copies may buy a high-volume copier. The machine cost $100,000 and will be depreciated straight-line over 5 years to a salvage value of $20,000. Kinky anticipates that the machine actually can be sold in 5 years for 30,000. The machine will save $20,000 a year in labor costs but will require an increase in working capital, mainly paper supplies, of $10,000. The firms marginal tax rate is 35 percent, and the discount rate is 8 percent. Should Kinky buy the machine.

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Solution Summary

The solution determines whether Kinky should buy the a high-volume copier machine. Please see Excel file for full solution.

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  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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