Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $321,000 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. The machine is currently priced at $1,710,000. The cost of the machine will decline by $106,000 per year until it reaches $1,180,000, where it will remain.
If your required return is 13 percent, calculate the NPV today.
Presented below are the production data for the first six months of the year for the mixed costs incurred by Gallup Company. Month Cost Units January €4,890 4,100 February 4,024 3,200 March 6,480 5,300 April 8,840 7,500 May 5,800 4,800 June 7,336 6,600 Gallup Company uses the high-low method to analyze mixed costs. a. How would the cost function be stated? b. What is the estimated total cost at an operating level of 5,000 units?
