A5misconsiderng prchasing a macine hat costs S60 000 t?be used for six yers and

Question

A5misconsiderng prchasing a macine hat costs S60 000 t?be used for six yers and he salag vaae att at S-kepided bean he made ave $32,000 per year in labor but t will incur $14,000 in operating and maintenance costs each year The machine will be depreciated according to tive year MACRS Thefon's tax rateis35% and ts at ax MARR is16% Should he machine be Click the icon to view the MACRS depreciation schedules )(akthe icon to view the nerest factors tor doete compounding when ,-10% per year The present worth of the project is sRound to the nearest dolil) Should the machine be purchased? Choose the comect answrer below

Explanation / Answer

npv year cost saving dep net saving tax @0.35 saving after tax Cash flow (+ dep) Discount 16% PV (CF*DIS) 0 -68000 -68000 1 -68000.0 1 18000 13600 4400 1540 2860 16460 0.862 14188.5 2 18000 21760 -3760 -1316 -2444 19316 0.743 14351.8 3 18000 13056 4944 1730.4 3213.6 16269.6 0.641 10428.8 4 18000 7833.6 10166.4 3558.24 6608.16 14441.76 0.552 7971.9 5 18000 7833.6 10166.4 3558.24 6608.16 14441.76 0.476 6874.3 6 18000 3916.8 14083.2 4929.12 9154.08 13070.88 0.41 5359.1 NPV= -8825.7 AS NPV IS IN NEGATIVE, SO MACHINE SHOULD NOT BE PURCHASED.

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