Rayburn Industries is evaluating the investment of $140,000 in a new packing machine that should provide annual cash operating inflows of $30,000 for 6 years. At the end of 6 years, the packing machine will be sold for $5,000. Rayburn's required rate of return is 8%.
Required:
a. | What is the machine's net present value? |
b. | Based on net present value, should Rayburn purchase the new packing machine? |
Why or Why not?
c. | List two qualitative items that Rayburn should consider in the decision to purchase |
the new machine.