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7/23/2019 Making Capital Investment Decisions Home Work Problem
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Making Capital Investment Decisions
Isaac, Inc. is thinking about purchasing a new machine. The new machine would cost$150,000 with an additional $30,000 for deliver of the machine. The machine will havea life of 5 ears and will be depreciated using the straight line method. The machine can
be sold for $!5,000 at the end of its life. This machine is e"pected to produce costsavings of $35,000 the first two ears and $50,000 per ear after. It will take a $10,000ad#ustment to net working capital if the machine is purchased. The compan has areuired return of %& and is in the 35& ta" bracket. 'alculate the ()* of the pro#ect anddetermine if the compan should purchase the machine.
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