Your company is deciding whether to invest in a new machine. The new machine will increase...

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Finance

Your company is deciding whether to invest in a new machine. Thenew machine will increase cash flow by $320,000 per year. Youbelieve the technology used in the machine has a 10-year life; inother words, no matter when you purchase the machine, it will beobsolete 10 years from today. The machine is currently priced at$1,700,000. The cost of the machine will decline by $106,000 peryear until it reaches $1,170,000, where it will remain.

If your required return is 13 percent, calculate the NPV if youpurchase the machine today. (Do not round intermediatecalculations and round your answer to 2 decimalplaces, e.g., 32.16.)

NPV $

If your required return is 13 percent, calculate the NPV if youwait to purchase the machine until the indicated year. (Anegative answer should be indicated by a minus sign. Do not roundintermediate calculations and round your answers to 2 decimalplaces, e.g., 32.16.)

NPV
Year 1 $
Year 2 $
Year 3 $
Year 4 $
Year 5 $
Year 6 $

Should you purchase the machine?
Yes
No

If so, when should you purchase it?
Today
One year from now
Two years from now

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Transcribed Image Text

Your company is deciding whether to invest in a new machine. Thenew machine will increase cash flow by $320,000 per year. Youbelieve the technology used in the machine has a 10-year life; inother words, no matter when you purchase the machine, it will beobsolete 10 years from today. The machine is currently priced at$1,700,000. The cost of the machine will decline by $106,000 peryear until it reaches $1,170,000, where it will remain.If your required return is 13 percent, calculate the NPV if youpurchase the machine today. (Do not round intermediatecalculations and round your answer to 2 decimalplaces, e.g., 32.16.)NPV $ If your required return is 13 percent, calculate the NPV if youwait to purchase the machine until the indicated year. (Anegative answer should be indicated by a minus sign. Do not roundintermediate calculations and round your answers to 2 decimalplaces, e.g., 32.16.) NPVYear 1$Year 2$Year 3$Year 4$Year 5$Year 6$Should you purchase the machine?YesNoIf so, when should you purchase it?TodayOne year from nowTwo years from now