Explain the positive net present value

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Automax Auto Parts Corporation is purchasing a new molding machine for $15,400. Its annual output will bring in $3,000 more revenue than the old machine it is replacing. The old machine has no salvage value; nor will the new machine at the end of its seven-year estimated useful life. The new machine costs $1,000 less per year to operate than did the old machine. The income tax rate is 50 percent.

1. Will the new machine have a positive net present value if the minimum acceptable rate of return is 14 percent per year compounded annually? (Factor = 4.288) Show your calculations

Reference no: EM132976152

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