Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by â‚Ź280,000 per year. You believe the technology used in the machine has a 10-year life: in other words, no matter when you purchase the machine, it will be obsolete 10 years from today (an produce no cash flows and have no salvage value).
The machine is currently priced at â‚Ź1,500,000. If your required return is 12 per cent, should you purchase the machine? If so, when should you purchase it? Your company pays no taxes.
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