Tony and Steve a re considering whether to purchase a new "bending brake." This machine puts precise bends in a material used in their vinyl siding business. The machine will cost$70,000. Tony and Steve estimate that the machine will generate profits as follows: $20,000 in its first year; $15,000 in years 2, 3, and 4; and $10,000 in years 5 and 6. They believe the machine will have no value after year 6.a) Should they purchase the machine if they believe they can make ll% on their money in other investments of similar risk?b) Should they purchase the machine if they believe they can makeonly 4% on their money in other investments of similar risk?
Tony and Steve a re considering whether to purchase a new "bending brake." This machine puts precise bends in a material used in their vinyl siding business. The machine will cost$70,000. Tony and Steve estimate that the machine will generate profits as follows: $20,000 in its first year; $15,000 in years 2, 3, and 4; and $10,000 in years 5 and 6. They believe the machine will have no value after year 6.a) Should they purchase the machine if they believe they can make ll% on their money in other investments of similar risk?b) Should they purchase the machine if they believe they can makeonly 4% on their money in other investments of similar risk?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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| Tony and Steve a re considering whether to purchase a new "bending brake." This machine puts precise bends in a material used in their vinyl siding business. The machine will cost $70,000. Tony and Steve estimate that the machine will generate profits as follows: $20,000 in its first year; $15,000 in years 2, 3, and 4; and $10,000 in years 5 and 6. They believe the machine will have no value after year 6. a) Should they purchase the machine if they believe they can make ll% on their money in other investments of similar risk? b) Should they purchase the machine if they believe they can make only 4% on their money in other investments of similar risk? |
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