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April 19, 2014

Homework Help: college

Posted by Fred on Tuesday, October 12, 2010 at 6:49pm.

You are replacing an old piece of machinery with a new one that offers improved technology and efficiencies to your company. The new machine will cost you $50,000 and it will provide you with a cash inflow of $10,500 PER YEAR for the next 7 years. You can sell the old machine for $6,800 at the time of purchase for the new equipment. The cost of capital for your company is 9%. What is the NPV of the investment? What is the IRR? Do you recommend investing in the new machine?

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