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Ajax is considering investing in a new machine that costs $30,000. It is expected that the new machine will save $11,000 a ye
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Answer #1

Calculation of net present value

Present value of annuity @ 14% in 6 years = 3.88867

Savings in operating cost per year = $ 11000

Net present value = ( 11000 × 3.88867 ) - 30000

= 42775.34 - 30000

= $ 12775.34

Net present value is positive. So it is acceptable.

Please provide feedback if it was helpful. Feel free to comment if you have any doubts.

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