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6. The Lopez Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product that Lopez will need

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6. The Lopez Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product that Lopez will need for the foreseeable future. Machine X costs $15 million but realizes after-tax inflows of $8 million per year for 5 years. After 5 years, the machine must be replaced. Machine Y costs $32 million and realizes after-tax inflows of $11 million per year for 10 years, after which it must be replaced. Assume that the machine prices are not expected to rise because inflation will be offset by cheaper components used in the machines. The cost of capital is 10%. By how much would the value of the company increase if it accepted the better machine? Which is the better' machine? (12)

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