Carri Company is negotiating for the purchase of a new machine. The machine is expected to generate operating cost savings of $225,000 per year for 4 years. Carri uses a 12% discount rate. What is the most Carri would be willing to pay for this machine? Ignore income taxes.

Question

Quizplus · Accepted Answer

The most Carri would be willing to pay for this machine is $683,325. This is calculated by dividing the annual operating cost savings of $225,000 by the discount rate of 12% and then multiplying by the number of years, 4.

Carri Company Is Negotiating for the Purchase of a New