Rooney incorporated is considering the purchase of a new machine costing $640,000. the machine's useful life is expected
Posted: Wed May 04, 2022 4:15 pm
Rooney incorporated is considering the purchase of a new machine
costing $640,000. the machine's useful life is expected to be 8
years with no salvage value. The straight line depreciation method
will be used. The net increase in annual after tax cash flow is
expected to be $147,000. Rooney estimates its cost of capital to be
14% (the present value of a $1 annuity for 8 years at 14% is 4.639,
and the present value of $1 to be received in 8 years is 0.351)
The net present value of the investment in the machine under
consideration is:
costing $640,000. the machine's useful life is expected to be 8
years with no salvage value. The straight line depreciation method
will be used. The net increase in annual after tax cash flow is
expected to be $147,000. Rooney estimates its cost of capital to be
14% (the present value of a $1 annuity for 8 years at 14% is 4.639,
and the present value of $1 to be received in 8 years is 0.351)
The net present value of the investment in the machine under
consideration is: