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Company A is considering the purchase of a $55,000 new machine that will increase revenues by $11,500 annually. The new machine will also enable the firm to initially reduce the need for inventory by $10,000 when the machine is installed. Company A's marginal tax rate is 40% and the cost of capital is 5.5%. Company A will depreciate the machine to $5,000 using the 5 year straight line method and expects to be able to sell the machine for $12,000 at the end of year 5. What is the NOV for the project? Should we accept or reject this project? Why or why not?

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Financial Management, Finance

Category:- Financial Management
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