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Question 1 3 pts A machine costs $98,000 to purchase and will provide $20,000 a year in benefits. The company plans to use th

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Answer #1

Yes we purchase the machine , because the Net Present value is Possitive

cash flow diagram 0 1 2 3 4 5 6 7 8 9 10 (98,000) 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 InvesNet Present value NPV Present value in inflows - Present value of outflows Present value of outflows = 98,000 Present value o

Net Present Value = 0

that means, the investment earns the same rate of return as the required rate (investment earns same return)

Net Present Value = + Positive

indicate that the investment earns higher rate of return than the required rate (investment earns more return)

Net Present Value = - Negative

Indicate that the investment earns lesser rate of return than the required rate (investment earns less return)

NPV = + , than accept the project

NPV = - , than reject the project

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