Johnson Corporation is interested in purchasing a state-of-the-art stamping machine for its manufacturing plant.The new machine has been designed to basically eliminate all errors and defects in the production process.The new machine will cost $180,000,and have a salvage value of $80,000 at the end of its eight-year useful life.Bailey has determined that cash inflows for years 1 through 8 will be as follows: $33,000; $58,000; $28,000; $39,000; $27,000; $22,000,$27,000 and $29,000,respectively.Maintenance will be required in years 3 and 6 at $14,000 and $9,000 respectively.Bailey uses a discount rate of 12 percent and wants projects to have a payback period of no longer than six years.
Present value tables or a financial calculator are required.
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