Manus Company is considering the purchase of a new high-speed machine for its factory. The machine will cost $170,000 and will save the company $42,000 per year in cash operating costs. The machine has an estimated useful life of five years and no expected salvage value. The company's cost of capital is 11%. Required: 1) Compute the net present value of this investment. 2) Using net present value as the only decision tool, is this an acceptable project? Why or why not?
Manus Company is considering the purchase of a new high-speed machine for its factory. The machine will cost $170,000 and will save the company $42,000 per year in cash operating costs. The machine has an estimated useful life of five years and no expected salvage value. The company's cost of capital is 11%. Required: 1) Compute the net present value of this investment. 2) Using net present value as the only decision tool, is this an acceptable project? Why or why not?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Manus Company is considering the purchase of a new high-speed machine for its factory. The machine will cost $170,000 and will save the company $42,000 per year in cash operating costs. The machine has an estimated useful life of five years and no expected salvage value. The company's cost of capital is 11%.
Required:
1) Compute the
2) Using net present value as the only decision tool, is this an acceptable project? Why or why not?
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