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How much per year must ramsey be willing to pay

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Reference no: EM132523553

Ramsey wants to buy a mat guillotine. The machine will cost $1,100 and he has developed the following estimates:

Cost of capital: 10%

Useful life of the machine: 7 years

Salvage value of the machine after 7 years: $120.

Although the guillotine will save time, the only tangible cost savings will be about $180 per year. The analysis shows a negative net present value.

Question 1: What is the NPV?

Question 2: Ramsey believes the machine will produce the intangible benefit of greater customer satisfaction. How much per year must Ramsey be willing to pay for this benefit?

Reference no: EM132523553

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