Managerial Economics 2nd Edition by William Boyes

Exercise 6

The manager of Global X is contemplating the purchase of a new machine that will cost $300,000 and has a useful life of five years. The machine is expected to yield cost reductions to Global X of $50,000 in year 1, $60,000 in year 2, $70,000 in year 3, and $80,000 in each year in years 4 and 5. Will the acquisition of the machine add value?