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8 pt X Company must replace one of its current machines with either Machine A Morbine A or Machine B. The useful life of both
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Answer #1
Extra cost of Machine B = 67,000-48,000 = $19000
Year Incremental Cash flows Cumulative Cash flows
0 -19000 -19000
1 -1000 -20000
2 4000 -16000
3 5000 -11000
4 5000 -6000
5 3000 -3000
6 3000 0
7 2000 2000
Hence, payback period = 6 years
i.e. E
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