You are considering purchasing a CNC machine which costs 190

You are considering purchasing a CNC machine which costs $190,000. This machine will have an estimated service life of 10 years with a net after-tax salvage value of $19,000. Its annual after-tax operating and maintenance costs are estimated to be $42,000. To expect an 17% rate of return on investment, what would be the required minimum annual after-tax revenues? Click the icon to view the interest facto for discrete compounding when i: 17% per year. The required minimum annual after-tax revenues would be sthousand. (Round to one decimal place)

Solution

Assuming Annual revenue to be X

Thus 4.6586X-195661.4+3952.71 = 190000

=4.6586X - 191709 = 190000

4.6586X = 381709

X = 81936.42$

Thus minimum revenue should be 81936.42$

Year	0	1 to 10	10
Cost of machine	-190000
Revenue		X
Operating expense		-42000
Salvage value			19000
Total cash flow	-190000	X-42000	19000
PVIF @ 17%	1		0.208037383
PVIFA(17%,1)		4.6586
Present value	-190000	4.6586X-195661.4	3952.710282