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1.Wood Products Company would like to purchase a computerized wood lathe for $100,000. The machine is expected to have a life of 5 years, and
1.Wood Products Company would like to purchase a computerized wood lathe for $100,000. The machine is expected to have a life of 5 years, and a salvage value of $5,000. Annual maintenance costs will total $20,000. Annual cash receipts resulting from this machine are predicted to be $45,000. The company's required rate of return is 15 percent.
a)Use Excel to calculate the net present value.
b)Use Excel to calculate the internal rate of return.
c)Based on your answer from parts a) and b), should the company purchase the wood lathe? Explain.
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