The Jackson Company is considering the purchase of a new machine that is expected to reduce cash outflows. The cost of this machine is $29,000. The annual reduction in cash outflows is as follows:
See attached doc.
If the cost of capital is 10%, please calculate the following:
- A. The Present Value of the Benefits (PVB) - Show your work.
- B. The Present Value of the Costs (PVC)
- C. Net Present Value (NPV) (Show your work)
- D. Should we buy the machine based on your above analysis? Please explain
The solution explains how to calculate Present Value of the Benefits (PVB), Present Value of the Costs (PVC) and Net Present Value (NPV) and make the purchase decision