You have the opportunity to invest in a machine that will cost ($340,000.) The machine will generate

Question:

You have the opportunity to invest in a machine that will cost $$340,000.$ The machine will generate cash flows of $$100,000$ at the end of each year and require maintenance costs of $$10,000$ at the beginning of each year. If the economic life of the machine is five years and the relevant discount rate is 10 percent, should you buy the machine? What if the relevant discount rate is 9 percent?

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