Answer to Question #310486 in Finance for K Swiss

Question

The manager of Automated Product is contemplating the purchase of a new machine that will cost $300,000 and has a useful life of five years. The machine will yield (year-end) cost reduction to Automated Product of $50,000 in year 1, $60,000 in year 2, $75,000 in year 3, and $90,000 in year 4 and 5. What is the present value of the cost savings of the machine if the interest rate is 8 percent? Should the manager purchase the machine?

Answer 1

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