Compute the net present value of each machine

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Two new machines are being evaluated for possible purchase. Forecasts relating to the two machines are:


Machine 1

Machine 2

Purchase price

$50,000

$60,000

Estimated life (straight-line depreciation)

4 years

4 years

Estimated scrap value

None

None

Annual cash benefits before income tax:



Year 1

$25,000

$45,000

Year 2

25,000

19,000

Year 3

25,000

25,000

Year 4

25,000

25,000

Income tax rate

40%

40%

Compute the net present value of each machine. (CGA, adapted)

 

Reference no: EM13513681

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