A corporation is considering purchasing a machine that has an 8-year life and will save...
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A corporation is considering purchasing a machine that has an 8-year life and will save the firm $4,500 per year in net operating costs. The machine would be depreciated on a straight-line basis to a zero salvage value. The firm has a 34% tax rate and a 12% p.a. required rate of return on this project.
2.a If the machine costs $25,000, what is its NPV and payback period?
2.b If the machine can be leased for $4,000 per year payable at the end of each year, should the firm buy the machine or lease it?
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