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2. Lyster Company wants to buy a new machine that will be able to perform many of the steps in the manufacturing process that they
2. Lyster Company wants to buy a new machine that will be able to perform many of the steps in the manufacturing process that they currently have to do manually. The hope is that it will reduce the amount of time it takes to create one unit and reduce the number of defective units. The machine requires an investment of $750,000. The machine will last six years with no expected salvage value. The expected after-tax cash flows associated with the project are as follows: Required: A. Compute the payback period for the new machine. B. Compute the new machine's ARR, assuming average annual profit of $210,000 C. Compute the investment's NPV, assuming a required rate of return of 12%. D. Compute the investment's IRR, assuming a required rate of return of 12%
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