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Cheyenne, Inc. is considering the purchase of a new machine for $630000 that has an estimated useful life of 5 years and no salvage value.
Cheyenne, Inc. is considering the purchase of a new machine for $630000 that has an estimated useful life of 5 years and no salvage value. The machine will generate net annual cash flows of $110250. It is believed that the new machine will reduce downtime because of its reliability. Assume the discount rate is 8%. In order to make the project acceptable, the increase in cash flows per year resulting from reduced downtime must be at least Present Value PV of an Annuity of 1 at 8% of 1 at 8% Year .926 .926 .857 1.783 .794 2.577 u Awn .735 3.312 3.993 .681 O O $19262 per year. $47526 per year. O $24008 per year. O $47219 per year. Use the following table, Present Value of an Annuity of 1 Period 8% 9% 10% 0.909 0.926 0.917 1.783 1.759 1.736 2.577 2.531 2.487 A company has a minimum required rate of return of 9%. It is considering investing in a project which costs $380000 and is expected to generate cash inflows of $160000 at the end of each year for three years. The net present value of this project is O $80000. O $404960. O $40496. $24960
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