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A machine shop has the opportunity to purchase a new machine for $20,000. After carefully studying projected costs and revenues, the company estimates that the
A machine shop has the opportunity to purchase a new machine for $20,000. After carefully studying projected costs and revenues, the company estimates that the new machine will produce a net cash flow of $2,600 annually and will last for ten years. At the end of ten years the machine will be sold for $500 salvage. Management feels that an interest rate of 6 percent is adequate for his business. Determine the maximum amount the company should pay for the machine.
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