Two machines-Machine M and Machine P-are being considered in a replacement decision. Both machines have about the
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Two machines-Machine M and Machine P-are being considered in a replacement decision. Both machines have about the same purchase price and an estimated ten-year life. The company uses a 12 percent minimum rate of return as its acceptance-rejection standard. Following are the estimated net cash inflows for each machine.
1. Compute the present value of future cash flows for each machine, using Tables 1 and 2 in the appendix on present value tables.
2. Which machine should the company purchase, assuming that both involve the same capitalinvestment?
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