As the owner of a pizza parlor, you are considering whether to buy a fully automated pizza dough preparation machine. Your staff is wildly supportive of the purchase because it would eliminate a tedious part of their work. Your accountant provides you with the following information:
The cost, including shipping, for the pizza machine is $25,000.
Cash savings, including labor, raw materials, and tax savings due to depreciation, are $3,500 per year for 10 years. R=10 percent.
As you arrive at the pizza parlor in the morning, the staff is in a festive mood because word has leaked out that the new machine will save the shop $35,000 and only cost $25,000.