The Rosco company is purchasing a new machine that will increase revenue for 8 years. The purchase price of the machine is $245,900 and will require working capital of $55,000. This new machine will require a major service in year 3 and year 6 of $37,500. The increase in revenue will be: Years 1, Year 2, and Year 3 will have an annual increase in revenue of $98,700. Year 4 - $118,400, Year 5 - $125,300, Year 6 - $96,100, Year 7 - $82,300 and Year 8 - 74,900. At the end of year 8, the company will sell the machine for scrap for $25,000. Calculate the net present value of the new machine using a 15% rate of return.

The Rosco company is purchasing a new machine that will increase revenue for 8 years. The purchase price of the machine is $245,900 and will require working capital of $55,000. This new machine will require a major service in year 3 and year 6 of $37,500. The increase in revenue will be: Years 1, Year 2, and Year 3 will have an annual increase in revenue of $98,700. Year 4 - $118,400, Year 5 - $125,300, Year 6 - $96,100, Year 7 - $82,300 and Year 8 - 74,900. At the end of year 8, the company will sell the machine for scrap for $25,000. Calculate the net present value of the new machine using a 15% rate of return.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 21P

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