Should You Buy the Machine?
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You have the opportunity to invest in a machine that costs $340,000.
The machine generates revenues of $100,000 at the end of each year, and requires maintenance costs of $10,000 at the beginning of each year. The machine incurs a maintenance cost today.
If the economic life of the machine is 5 years, and the discount rate is 10%, should you by the machine?
What if the discount rate is 9%?
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Solution Summary
The solution determines whether you should invest in a machine, even with a discounted rate.
Solution Preview
See the attached file for full solution.
NPV = -($340,000 + $10,000) + ($100,000 - $10,000) / 1.1 + $90,000 ...
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