Capital Budgeting and Project of Acquiring New Machinery
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A manufacturer is considering the purchase of a new machine to speed production and save money. The net cost of the machine is $45,000. The annual cash flows are as follows:
Year Cash Flow
1 15,000
2 20,000
3 25,000
4 10,000
5 5,000
What is the payback period?
If the cost of capital is 10%, what is the net present value?
Should the project be accepted? Why or why not?
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Solution Summary
The solution explains the calculation of payback period and NPV for a the purchase of a new machine and the acceptance/rejection decision
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A manufacturer is considering the purchase of a new machine to speed production and save money. The net
cost of the machine is $45,000. The annual cash flows are as follows: (6 points)
Year Cash Flow
1 15,000
2 20,000
3 25,000
4 10,000
5 5,000
What is the payback ...
Purchase this Solution
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