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    PBC, PVC, and NPV for Company A

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    Company A is considering the purchase of a new machine that would lower cash outflow. The cost of the machine is 30,000. The annual reduction in cash flows is:

    Year Amount
    1 5000
    2 8000
    3 12000
    4 14000

    If the cost of capital is 10%, calculate the following:

    - the net present value of benefits (pvb)
    - the net present value of costs (pvc)
    - the net present value (npv)
    - based on these analysis, should company A buy the machine?

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    Solution Preview

    1. The net present value of benefits (pvb) = ...

    Solution Summary

    A buying scenario is considered.