Rambus Inc.would like to purchase a production machine for $325,000.The machine is expected to have a life of three years,and a salvage value of $50,000.Annual maintenance costs will total $12,500.Annual savings are predicted to be $112,500.The company's required rate of return is 12 percent.
(1)Using the Present Value Factors for $1,calculate the net present value of this investment (ignoring taxes).
(2)Based on your answer in requirement 1,should Rambus purchase the production machine?
Definitions:
Uniform Commercial Code
A standardized collection of laws and regulations for the conduct of business transactions and the sale of goods across the United States.
Good Faith
An honest intention to act without taking an unfair advantage over another person.
Wrongful Rejection
The unjustified refusal of a buyer to accept goods or services as stipulated in a contract.
Good Faith
The genuine intention to act without taking an unfair advantage over another party in a transaction.
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