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A firm decides to invest in a new piece of machinery which is expected to produce additional revenue of $8000 at the end of every
A firm decides to invest in a new piece of machinery which is expected to produce additional revenue of $8000 at the end of every year for 10 years. At the end of this period, the firm plans to sell the machinery for scrap, for which it expects to receive $5000. What is the maximum amount that the firm should pay for the machine if it is not to suffer a net loss as a result of this investment? You may assume that the discount rate is 6% compounded annually.
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