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A Corporation has the opportunity to buy one of two mutually exclusive machines that will produce computers. Machine-X costs $10 million and generates after-tax inflows
A Corporation has the opportunity to buy one of two mutually exclusive machines that will produce computers. Machine-X costs $10 million and generates after-tax inflows of $2 million per year for 4 years. After 4 years, the machine must be replaced. Machine-Y costs $15 million and generates after-tax inflows of $1.5 million per year for 7 years, after which it must be replaced. The cost of capital is 10%. Which machine should be preferred?
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