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1 pts Question 10 Strange Manufacturing Company is considering the purchase of a production facility at a cost of $21 million
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Answer #1

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=7,000,000/1.18+7,000,000/1.18^2+7,000,000/1.18^3+7,000,000/1.18^4+7,000,000/1.18^5

=21890197.15

NPV=Present value of inflows-Present value of outflows

=21890197.15-21,000,000

=$890197(Approx)

Hence since NPV is positive;facility should be purchased.

Hence the correct option is:

$890197;Yes

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