Davies Inc.would like to purchase a new machine for $300,000.The machine will have a life of four years with no salvage value,and is expected to generate annual cash revenue of $180,000.Annual cash expenses,excluding depreciation,will total $20,000.The company uses the straight-line depreciation method,has a tax rate of 30 percent,and requires a 12 percent rate of return.
(1)Find the net present value of this investment using the following factors.
(2)Should the company purchase the machine? Explain.
Definitions:
Emergency Commitment
The temporary commitment to a mental hospital of a patient who is behaving in a bizarre or violent way.
Psychological Disorder
A condition characterized by disturbances in a person's thoughts, feelings, or behavior, which leads to significant distress or impairment in functioning.
Committed
Showing dedication and perseverance in pursuing goals, or, in a legal context, being compulsorily detained under mental health legislation.
Dangerous
The potential to cause harm or adverse effects to oneself or others.
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