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ABC Telecom plans to purchase a new machine that will produce mobile phones. The new machine will require an initial investment of $450,000 and has

  1. ABC Telecom plans to purchase a new machine that will produce mobile phones. The new machine will require an initial investment of $450,000 and has an economic life of five years and will be fully depreciated by the straight-line method. The machine will produce 20.000 mobile phones per year with each costing $120,00 to make. Each will be sold at $130,00. Assume LAR Telecom uses a discount rate of 22 percent and has a tax rate of 40 percent. What is the NPV of the project and should LAR Telecom make the purchase? If not, please explain why.

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