Current business by purchasing a new piece of equipment

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You are a financial manager at Church Inc. Church wants to expand its current business by purchasing a new piece of equipment for $400,000 that will be in use for 4 years. It has a salvage value of $50,000, but will be sold for $80,000 at the end of the project’s life. It saves Church $95,000 a year. Church has a marginal tax rate of 35%. Its beta is 0.8 and the risk-free rate is 1%. Should Church buy this machine?

Reference no: EM131546326

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