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A company is analyzing the purchase of new equipment with the following details: Equipment cost: 500 million Estimated life: 8 years Annual savings: 80 million
A company is analyzing the purchase of new equipment with the following details:
- Equipment cost: ¥500 million
- Estimated life: 8 years
- Annual savings: ¥80 million
- Depreciation: Sum of the years' digits method
- Salvage value: ¥20 million
- Discount rate: 6%
Required:
- Calculate the annual depreciation expenses.
- Determine the NPV of the equipment purchase.
- Compute the IRR.
- Calculate the payback period.
- Advise on the purchase decision based on financial metrics.
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