Abc co wants to buy a 1 million lathe it would be, Ask an Expert

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ABC Co. wants to buy a $1 million lathe. It would be depreciated straight-line to zero salvage over 10 years. The lathe will need $80,000 in inventory of which 50% will be on credit. The lathe is expected to be sold after 10 years for $100,000. The lathe is expected to generate $250,000 in cash revenue and have operating costs of $50,000 per year over 10 years. The tax rate is 30% and the WACC is 10%. Is this an acceptable project? What is the NPV?

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Financial Management, Finance

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