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A company is considering the purchase of a $40,000 machine…

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A company is considering the...
A company is considering the purchase of a $40,000 machine that would reduce operating costs by $7,000 per year. At the end of the machine's 8 year useful life, it will have zero scrap value. The company's required rate of return is 12%. (Ignore income taxes)
1. NPV of the investment in the machine
2. Difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine?
Submitted: 8 years ago.Category: Business and Finance Homework
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Answered in 13 minutes by:
6/16/2010
Business Tutor: Steve, MBA replied 8 years ago
Steve
Steve, MBA
Category: Business and Finance Homework
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Hi,

 

Here is your answer:

 

http://www.box.net/index.php?rm=box_download_shared_file&file_id=f_451566422&shared_name=xl0ihcmf29

 

Let me know if you have questions. Please press accept if satisfied.

 

Steve

 

Steve
Steve, MBA
Category: Business and Finance Homework
Satisfied Customers: 25,951
Experience: MBA
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Customer reply replied 8 years ago

Stephen,

Thank you. Can you show me the forumla you used or the Excel program so that I can replicate and learn?

 

Thanks!

Business Tutor: Steve, MBA replied 8 years ago

Hi,

 

I used the normal discounting formula of dividing cashlfows by (1+r^n) where r is the discount rate (12% here) and n is the year in which the cashflow is received.

 

The formulas are in excel, so you can see them there.

 

Please feel free to request me directly in the future by posting to me at this link:

 

http://www.justanswer.com/profile.aspx?PF=26942375&FID=212

 

And be sure to put "for stephen only" at the start of the question.

 

Steve

 

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