Case Study Unit 7 Student Template Peregrine_The CNC Machine Decision Option 1: Purchase the CNC Machine with Cash Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Inflows Gross Revenue Salvage value Total Inflows Outflows Initial purchase Cost of Goods Sold Operating Costs Total Outflows Overall Cashflow Net Present Value: Payback Period years Discount Rate Option 2: Finance the Purchase of the CNC Machine Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Inflows Gross Revenue Salvage value Total Inflows Outflows Initial purchase Cost of Goods Sold Operating Costs Lease payments payment Total Outflows Overall Cashflow Net Present Value: Payback Period years Discount rate Adapted from IMA IMA EDUCATIONAL CASE JOURNAL VOL.

10, NO. 3, ART. 1, SEPTEMBER 2017 ISSN X Peregrine: The CNC Machine Decision Tony Bell Thompson Rivers University Dr. Andrew Fergus Thompson Rivers University INTRODUCTION It was another sleepless night for Brian French. As a new father, French had grown accustomed to sleep deprivation, but on this night, it was his business—not his newborn daughter—that had him tossing and turning.

French was the president and co-owner of Peregrine, a Vancouver-based manufacturer of custom retail displays that were used in stores, banks, and art galleries. Peregrine had been working on a display for Best Buy when one of the company’s two computer-numerical-control (CNC) machines broke down. When the machine went down, French watched progress on the Best Buy job slow to a halt. Although French had been assured that the CNC machine would be back up and running within 24 hours, the breakdown revealed a deeper problem: the CNC machines represented a major bottleneck for Peregrine, and if this machine was down for more than the promised 24-hour period, the Best Buy job could not be completed on time, and workers would need to be sent home.

French was frustrated by this predicament and was determined to make the changes necessary to ensure it would not happen again. PEREGRINE In 2012, French left PricewaterhouseCoopers to purchase Peregrine along with two co- investors. The investment team had been looking for an opportunity to purchase a company with a successful track record and a founder who was ready for retirement; Peregrine had fit the bill. Founded in 1977, Peregrine had been operated profitably for 35 years in downtown Vancouver, British Columbia, Canada. In Peregrine, the investors would be acquiring a company with a history of success and an experienced team that had expertise in manufacturing a wide array of custom plastic products.

When Peregrine was acquired in 2012, it had employed 6 people and had 0,000 in sales. Under French’s management, the company had grown to more than 30 employees and more than million in sales by 2016. THE CNC MACHINE DECISION When the CNC machine broke down, it was a wake-up call for French. The production line was dependent on both CNC machines working full time—if they slowed down or needed repair, the business suffered. French believed the key to relieving this bottleneck would be increasing capacity.

It not only would prevent downtime but also would allow the company to take on new business. If capacity increased, French estimated that sales revenues would rise by at least ,000 per month due to unmet demand and increased efficiency. The company’s margins on the additional revenues were expected to be 35%. French saw two viable options to increase capacity: 1. Purchase an additional CNC machine for cash, or 2.

Finance the purchase of an additional CNC machine 1 French considered the details of each option, keeping in mind that for long-term projects he would use a discount rate of 7%. OPTION 1: PURCHASE A NEW CNC MACHINE WITH CASH Although it would be costly, the idea of adding a third CNC machine appealed to French. It would provide him peace of mind that if there were a breakdown, jobs would continue on schedule. French’s preliminary research revealed that the cost of the new equipment would be 2,000. He also estimated that there would be increased out-of- pocket operating costs of ,000 per month if a new machine were brought online.

After five years, the machine would have a salvage value of ,000. Although Peregrine did not have the cash readily available to make the purchase, French believed that with a small amount of cash budgeting and planning, this option would be feasible. OPTION 2: FINANCE THE PURCHASE OF A NEW CNC MACHINE The company selling the CNC machine also offered a leasing option. The terms of the lease included a down payment of ,000 and monthly payments of

Case Studyunit 7 Student Templateperegrine The Cnc Machine Decisionopt

Case Study Unit 7 Student Template Peregrine_The CNC Machine Decision Option 1: Purchase the CNC Machine with Cash Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Inflows Gross Revenue Salvage value Total Inflows Outflows Initial purchase Cost of Goods Sold Operating Costs Total Outflows Overall Cashflow Net Present Value: Payback Period years Discount Rate Option 2: Finance the Purchase of the CNC Machine Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Inflows Gross Revenue Salvage value Total Inflows Outflows Initial purchase Cost of Goods Sold Operating Costs Lease payments $1 payment Total Outflows Overall Cashflow Net Present Value: Payback Period years Discount rate Adapted from IMA IMA EDUCATIONAL CASE JOURNAL VOL.

10, NO. 3, ART. 1, SEPTEMBER 2017 ISSN X Peregrine: The CNC Machine Decision Tony Bell Thompson Rivers University Dr. Andrew Fergus Thompson Rivers University INTRODUCTION It was another sleepless night for Brian French. As a new father, French had grown accustomed to sleep deprivation, but on this night, it was his business—not his newborn daughter—that had him tossing and turning.

French was the president and co-owner of Peregrine, a Vancouver-based manufacturer of custom retail displays that were used in stores, banks, and art galleries. Peregrine had been working on a display for Best Buy when one of the company’s two computer-numerical-control (CNC) machines broke down. When the machine went down, French watched progress on the Best Buy job slow to a halt. Although French had been assured that the CNC machine would be back up and running within 24 hours, the breakdown revealed a deeper problem: the CNC machines represented a major bottleneck for Peregrine, and if this machine was down for more than the promised 24-hour period, the Best Buy job could not be completed on time, and workers would need to be sent home.

French was frustrated by this predicament and was determined to make the changes necessary to ensure it would not happen again. PEREGRINE In 2012, French left PricewaterhouseCoopers to purchase Peregrine along with two co- investors. The investment team had been looking for an opportunity to purchase a company with a successful track record and a founder who was ready for retirement; Peregrine had fit the bill. Founded in 1977, Peregrine had been operated profitably for 35 years in downtown Vancouver, British Columbia, Canada. In Peregrine, the investors would be acquiring a company with a history of success and an experienced team that had expertise in manufacturing a wide array of custom plastic products.

When Peregrine was acquired in 2012, it had employed 6 people and had $600,000 in sales. Under French’s management, the company had grown to more than 30 employees and more than $6 million in sales by 2016. THE CNC MACHINE DECISION When the CNC machine broke down, it was a wake-up call for French. The production line was dependent on both CNC machines working full time—if they slowed down or needed repair, the business suffered. French believed the key to relieving this bottleneck would be increasing capacity.

It not only would prevent downtime but also would allow the company to take on new business. If capacity increased, French estimated that sales revenues would rise by at least $50,000 per month due to unmet demand and increased efficiency. The company’s margins on the additional revenues were expected to be 35%. French saw two viable options to increase capacity: 1. Purchase an additional CNC machine for cash, or 2.

Finance the purchase of an additional CNC machine 1 French considered the details of each option, keeping in mind that for long-term projects he would use a discount rate of 7%. OPTION 1: PURCHASE A NEW CNC MACHINE WITH CASH Although it would be costly, the idea of adding a third CNC machine appealed to French. It would provide him peace of mind that if there were a breakdown, jobs would continue on schedule. French’s preliminary research revealed that the cost of the new equipment would be $142,000. He also estimated that there would be increased out-of- pocket operating costs of $10,000 per month if a new machine were brought online.

After five years, the machine would have a salvage value of $40,000. Although Peregrine did not have the cash readily available to make the purchase, French believed that with a small amount of cash budgeting and planning, this option would be feasible. OPTION 2: FINANCE THE PURCHASE OF A NEW CNC MACHINE The company selling the CNC machine also offered a leasing option. The terms of the lease included a down payment of $50,000 and monthly payments of $2,200 for five years. After five years, the equipment could be purchased for $1.

The operating costs and salvage values would be the same as option 1, the purchasing option. The company had the necessary cash on hand to make the down payment for the lease. With both the leasing and purchasing options, the company had sufficient space to operate the new equipment, and French believed he had almost all of the right employees in place to execute this plan. ASSIGNMENT REQUIREMENTS: 1. Quantitative Analysis: Compute and compare the net present value and payback period of each option.

2. Qualitative Analysis: In a 2-3 page report, make a recommendation for French. Be sure to provide a written analysis of the results of your quantitative analysis (do not copy and paste Excel worksheet into your document). Critically analyze both options and support your recommendation with a minimum of 3 academic resources. Peregrine_The CNC Machine Decision Adapted from IMA IMA EDUCATIONAL CASE JOURNAL VOL.

10, NO. 3, ART. 1, SEPTEMBER 2017 ISSN X Peregrine: The CNC Machine Decision Tony Bell Thompson Rivers University Dr. Andrew Fergus Thompson Rivers University INTRODUCTION It was another sleepless night for Brian French. As a new father, French had grown accustomed to sleep deprivation, but on this night, it was his business—not his newborn daughter—that had him tossing and turning.

French was the president and co-owner of Peregrine, a Vancouver-based manufacturer of custom retail displays that were used in stores, banks, and art galleries. Peregrine had been working on a display for Best Buy when one of the company’s two computer-numerical-control (CNC) machines broke down. When the machine went down, French watched progress on the Best Buy job slow to a halt. Although French had been assured that the CNC machine would be back up and running within 24 hours, the breakdown revealed a deeper problem: the CNC machines represented a major bottleneck for Peregrine, and if this machine was down for more than the promised 24-hour period, the Best Buy job could not be completed on time, and workers would need to be sent home.

French was frustrated by this predicament and was determined to make the changes necessary to ensure it would not happen again. PEREGRINE In 2012, French left PricewaterhouseCoopers to purchase Peregrine along with two co- investors. The investment team had been looking for an opportunity to purchase a company with a successful track record and a founder who was ready for retirement; Peregrine had fit the bill. Founded in 1977, Peregrine had been operated profitably for 35 years in downtown Vancouver, British Columbia, Canada. In Peregrine, the investors would be acquiring a company with a history of success and an experienced team that had expertise in manufacturing a wide array of custom plastic products.

When Peregrine was acquired in 2012, it had employed 6 people and had $600,000 in sales. Under French’s management, the company had grown to more than 30 employees and more than $6 million in sales by 2016. THE CNC MACHINE DECISION When the CNC machine broke down, it was a wake-up call for French. The production line was dependent on both CNC machines working full time—if they slowed down or needed repair, the business suffered. French believed the key to relieving this bottleneck would be increasing capacity.

It not only would prevent downtime but also would allow the company to take on new business. If capacity increased, French estimated that sales revenues would rise by at least $50,000 per month due to unmet demand and increased efficiency. The company’s margins on the additional revenues were expected to be 35%. French saw two viable options to increase capacity: 1. Purchase an additional CNC machine for cash, or 2.

Finance the purchase of an additional CNC machine 1 French considered the details of each option, keeping in mind that for long-term projects he would use a discount rate of 7%. OPTION 1: PURCHASE A NEW CNC MACHINE WITH CASH Although it would be costly, the idea of adding a third CNC machine appealed to French. It would provide him peace of mind that if there were a breakdown, jobs would continue on schedule. French’s preliminary research revealed that the cost of the new equipment would be $142,000. He also estimated that there would be increased out-of- pocket operating costs of $10,000 per month if a new machine were brought online.

After five years, the machine would have a salvage value of $40,000. Although Peregrine did not have the cash readily available to make the purchase, French believed that with a small amount of cash budgeting and planning, this option would be feasible. OPTION 2: FINANCE THE PURCHASE OF A NEW CNC MACHINE The company selling the CNC machine also offered a leasing option. The terms of the lease included a down payment of $50,000 and monthly payments of $2,200 for five years. After five years, the equipment could be purchased for $1.

The operating costs and salvage values would be the same as option 1, the purchasing option. The company had the necessary cash on hand to make the down payment for the lease. With both the leasing and purchasing options, the company had sufficient space to operate the new equipment, and French believed he had almost all of the right employees in place to execute this plan.

,200 for five years. After five years, the equipment could be purchased for .

The operating costs and salvage values would be the same as option 1, the purchasing option. The company had the necessary cash on hand to make the down payment for the lease. With both the leasing and purchasing options, the company had sufficient space to operate the new equipment, and French believed he had almost all of the right employees in place to execute this plan. ASSIGNMENT REQUIREMENTS: 1. Quantitative Analysis: Compute and compare the net present value and payback period of each option.

2. Qualitative Analysis: In a 2-3 page report, make a recommendation for French. Be sure to provide a written analysis of the results of your quantitative analysis (do not copy and paste Excel worksheet into your document). Critically analyze both options and support your recommendation with a minimum of 3 academic resources. Peregrine_The CNC Machine Decision Adapted from IMA IMA EDUCATIONAL CASE JOURNAL VOL.

10, NO. 3, ART. 1, SEPTEMBER 2017 ISSN X Peregrine: The CNC Machine Decision Tony Bell Thompson Rivers University Dr. Andrew Fergus Thompson Rivers University INTRODUCTION It was another sleepless night for Brian French. As a new father, French had grown accustomed to sleep deprivation, but on this night, it was his business—not his newborn daughter—that had him tossing and turning.

French was the president and co-owner of Peregrine, a Vancouver-based manufacturer of custom retail displays that were used in stores, banks, and art galleries. Peregrine had been working on a display for Best Buy when one of the company’s two computer-numerical-control (CNC) machines broke down. When the machine went down, French watched progress on the Best Buy job slow to a halt. Although French had been assured that the CNC machine would be back up and running within 24 hours, the breakdown revealed a deeper problem: the CNC machines represented a major bottleneck for Peregrine, and if this machine was down for more than the promised 24-hour period, the Best Buy job could not be completed on time, and workers would need to be sent home.

French was frustrated by this predicament and was determined to make the changes necessary to ensure it would not happen again. PEREGRINE In 2012, French left PricewaterhouseCoopers to purchase Peregrine along with two co- investors. The investment team had been looking for an opportunity to purchase a company with a successful track record and a founder who was ready for retirement; Peregrine had fit the bill. Founded in 1977, Peregrine had been operated profitably for 35 years in downtown Vancouver, British Columbia, Canada. In Peregrine, the investors would be acquiring a company with a history of success and an experienced team that had expertise in manufacturing a wide array of custom plastic products.

When Peregrine was acquired in 2012, it had employed 6 people and had 0,000 in sales. Under French’s management, the company had grown to more than 30 employees and more than million in sales by 2016. THE CNC MACHINE DECISION When the CNC machine broke down, it was a wake-up call for French. The production line was dependent on both CNC machines working full time—if they slowed down or needed repair, the business suffered. French believed the key to relieving this bottleneck would be increasing capacity.

It not only would prevent downtime but also would allow the company to take on new business. If capacity increased, French estimated that sales revenues would rise by at least ,000 per month due to unmet demand and increased efficiency. The company’s margins on the additional revenues were expected to be 35%. French saw two viable options to increase capacity: 1. Purchase an additional CNC machine for cash, or 2.

Finance the purchase of an additional CNC machine 1 French considered the details of each option, keeping in mind that for long-term projects he would use a discount rate of 7%. OPTION 1: PURCHASE A NEW CNC MACHINE WITH CASH Although it would be costly, the idea of adding a third CNC machine appealed to French. It would provide him peace of mind that if there were a breakdown, jobs would continue on schedule. French’s preliminary research revealed that the cost of the new equipment would be 2,000. He also estimated that there would be increased out-of- pocket operating costs of ,000 per month if a new machine were brought online.

After five years, the machine would have a salvage value of ,000. Although Peregrine did not have the cash readily available to make the purchase, French believed that with a small amount of cash budgeting and planning, this option would be feasible. OPTION 2: FINANCE THE PURCHASE OF A NEW CNC MACHINE The company selling the CNC machine also offered a leasing option. The terms of the lease included a down payment of ,000 and monthly payments of

Case Studyunit 7 Student Templateperegrine The Cnc Machine Decisionopt

Case Study Unit 7 Student Template Peregrine_The CNC Machine Decision Option 1: Purchase the CNC Machine with Cash Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Inflows Gross Revenue Salvage value Total Inflows Outflows Initial purchase Cost of Goods Sold Operating Costs Total Outflows Overall Cashflow Net Present Value: Payback Period years Discount Rate Option 2: Finance the Purchase of the CNC Machine Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Inflows Gross Revenue Salvage value Total Inflows Outflows Initial purchase Cost of Goods Sold Operating Costs Lease payments $1 payment Total Outflows Overall Cashflow Net Present Value: Payback Period years Discount rate Adapted from IMA IMA EDUCATIONAL CASE JOURNAL VOL.

10, NO. 3, ART. 1, SEPTEMBER 2017 ISSN X Peregrine: The CNC Machine Decision Tony Bell Thompson Rivers University Dr. Andrew Fergus Thompson Rivers University INTRODUCTION It was another sleepless night for Brian French. As a new father, French had grown accustomed to sleep deprivation, but on this night, it was his business—not his newborn daughter—that had him tossing and turning.

French was the president and co-owner of Peregrine, a Vancouver-based manufacturer of custom retail displays that were used in stores, banks, and art galleries. Peregrine had been working on a display for Best Buy when one of the company’s two computer-numerical-control (CNC) machines broke down. When the machine went down, French watched progress on the Best Buy job slow to a halt. Although French had been assured that the CNC machine would be back up and running within 24 hours, the breakdown revealed a deeper problem: the CNC machines represented a major bottleneck for Peregrine, and if this machine was down for more than the promised 24-hour period, the Best Buy job could not be completed on time, and workers would need to be sent home.

French was frustrated by this predicament and was determined to make the changes necessary to ensure it would not happen again. PEREGRINE In 2012, French left PricewaterhouseCoopers to purchase Peregrine along with two co- investors. The investment team had been looking for an opportunity to purchase a company with a successful track record and a founder who was ready for retirement; Peregrine had fit the bill. Founded in 1977, Peregrine had been operated profitably for 35 years in downtown Vancouver, British Columbia, Canada. In Peregrine, the investors would be acquiring a company with a history of success and an experienced team that had expertise in manufacturing a wide array of custom plastic products.

When Peregrine was acquired in 2012, it had employed 6 people and had $600,000 in sales. Under French’s management, the company had grown to more than 30 employees and more than $6 million in sales by 2016. THE CNC MACHINE DECISION When the CNC machine broke down, it was a wake-up call for French. The production line was dependent on both CNC machines working full time—if they slowed down or needed repair, the business suffered. French believed the key to relieving this bottleneck would be increasing capacity.

It not only would prevent downtime but also would allow the company to take on new business. If capacity increased, French estimated that sales revenues would rise by at least $50,000 per month due to unmet demand and increased efficiency. The company’s margins on the additional revenues were expected to be 35%. French saw two viable options to increase capacity: 1. Purchase an additional CNC machine for cash, or 2.

Finance the purchase of an additional CNC machine 1 French considered the details of each option, keeping in mind that for long-term projects he would use a discount rate of 7%. OPTION 1: PURCHASE A NEW CNC MACHINE WITH CASH Although it would be costly, the idea of adding a third CNC machine appealed to French. It would provide him peace of mind that if there were a breakdown, jobs would continue on schedule. French’s preliminary research revealed that the cost of the new equipment would be $142,000. He also estimated that there would be increased out-of- pocket operating costs of $10,000 per month if a new machine were brought online.

After five years, the machine would have a salvage value of $40,000. Although Peregrine did not have the cash readily available to make the purchase, French believed that with a small amount of cash budgeting and planning, this option would be feasible. OPTION 2: FINANCE THE PURCHASE OF A NEW CNC MACHINE The company selling the CNC machine also offered a leasing option. The terms of the lease included a down payment of $50,000 and monthly payments of $2,200 for five years. After five years, the equipment could be purchased for $1.

The operating costs and salvage values would be the same as option 1, the purchasing option. The company had the necessary cash on hand to make the down payment for the lease. With both the leasing and purchasing options, the company had sufficient space to operate the new equipment, and French believed he had almost all of the right employees in place to execute this plan. ASSIGNMENT REQUIREMENTS: 1. Quantitative Analysis: Compute and compare the net present value and payback period of each option.

2. Qualitative Analysis: In a 2-3 page report, make a recommendation for French. Be sure to provide a written analysis of the results of your quantitative analysis (do not copy and paste Excel worksheet into your document). Critically analyze both options and support your recommendation with a minimum of 3 academic resources. Peregrine_The CNC Machine Decision Adapted from IMA IMA EDUCATIONAL CASE JOURNAL VOL.

10, NO. 3, ART. 1, SEPTEMBER 2017 ISSN X Peregrine: The CNC Machine Decision Tony Bell Thompson Rivers University Dr. Andrew Fergus Thompson Rivers University INTRODUCTION It was another sleepless night for Brian French. As a new father, French had grown accustomed to sleep deprivation, but on this night, it was his business—not his newborn daughter—that had him tossing and turning.

French was the president and co-owner of Peregrine, a Vancouver-based manufacturer of custom retail displays that were used in stores, banks, and art galleries. Peregrine had been working on a display for Best Buy when one of the company’s two computer-numerical-control (CNC) machines broke down. When the machine went down, French watched progress on the Best Buy job slow to a halt. Although French had been assured that the CNC machine would be back up and running within 24 hours, the breakdown revealed a deeper problem: the CNC machines represented a major bottleneck for Peregrine, and if this machine was down for more than the promised 24-hour period, the Best Buy job could not be completed on time, and workers would need to be sent home.

French was frustrated by this predicament and was determined to make the changes necessary to ensure it would not happen again. PEREGRINE In 2012, French left PricewaterhouseCoopers to purchase Peregrine along with two co- investors. The investment team had been looking for an opportunity to purchase a company with a successful track record and a founder who was ready for retirement; Peregrine had fit the bill. Founded in 1977, Peregrine had been operated profitably for 35 years in downtown Vancouver, British Columbia, Canada. In Peregrine, the investors would be acquiring a company with a history of success and an experienced team that had expertise in manufacturing a wide array of custom plastic products.

When Peregrine was acquired in 2012, it had employed 6 people and had $600,000 in sales. Under French’s management, the company had grown to more than 30 employees and more than $6 million in sales by 2016. THE CNC MACHINE DECISION When the CNC machine broke down, it was a wake-up call for French. The production line was dependent on both CNC machines working full time—if they slowed down or needed repair, the business suffered. French believed the key to relieving this bottleneck would be increasing capacity.

It not only would prevent downtime but also would allow the company to take on new business. If capacity increased, French estimated that sales revenues would rise by at least $50,000 per month due to unmet demand and increased efficiency. The company’s margins on the additional revenues were expected to be 35%. French saw two viable options to increase capacity: 1. Purchase an additional CNC machine for cash, or 2.

Finance the purchase of an additional CNC machine 1 French considered the details of each option, keeping in mind that for long-term projects he would use a discount rate of 7%. OPTION 1: PURCHASE A NEW CNC MACHINE WITH CASH Although it would be costly, the idea of adding a third CNC machine appealed to French. It would provide him peace of mind that if there were a breakdown, jobs would continue on schedule. French’s preliminary research revealed that the cost of the new equipment would be $142,000. He also estimated that there would be increased out-of- pocket operating costs of $10,000 per month if a new machine were brought online.

After five years, the machine would have a salvage value of $40,000. Although Peregrine did not have the cash readily available to make the purchase, French believed that with a small amount of cash budgeting and planning, this option would be feasible. OPTION 2: FINANCE THE PURCHASE OF A NEW CNC MACHINE The company selling the CNC machine also offered a leasing option. The terms of the lease included a down payment of $50,000 and monthly payments of $2,200 for five years. After five years, the equipment could be purchased for $1.

The operating costs and salvage values would be the same as option 1, the purchasing option. The company had the necessary cash on hand to make the down payment for the lease. With both the leasing and purchasing options, the company had sufficient space to operate the new equipment, and French believed he had almost all of the right employees in place to execute this plan.

,200 for five years. After five years, the equipment could be purchased for .

The operating costs and salvage values would be the same as option 1, the purchasing option. The company had the necessary cash on hand to make the down payment for the lease. With both the leasing and purchasing options, the company had sufficient space to operate the new equipment, and French believed he had almost all of the right employees in place to execute this plan.

Paper for above instructions

Introduction

Brian French, president and co-owner of Peregrine, faces a crucial decision: to purchase a new CNC machine with cash or finance its acquisition. This decision arises from a recent breakdown of one of his existing CNC machines, leading to production delays and potential losses. As French aims to alleviate this bottleneck and satisfy increased demand, a careful analysis of both options must be conducted, evaluating their quantitative and qualitative implications.

Quantitative Analysis

Option 1: Purchase the CNC Machine with Cash

Initial Investment

- Cost of CNC Machine: 2,000

Monthly Outflows

- Operating Costs: ,000 per month
- Total Operating Costs over 5 years: 5 years × 12 months × ,000 = 0,000

Salvage Value

- At the end of year 5: ,000

Total Outflows

- Total Cash Outflows Over Five Years: 2,000 + 0,000 - ,000 = 2,000

Cash Inflows

- Additional Revenue per Month: ,000
- Total Additional Revenue Over 5 Years: 5 years × 12 months × ,000 =