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Jefferson Labs, a nonprofit organization, estimates that it can save 30000 a year in cash operating costs for the next 10 years if it buys
Jefferson Labs, a nonprofit organization, estimates that it can save 30000 a year in cash operating costs for the next 10 years if it buys a special-purpose eye-testing machine at a cost of 135000. No terminal disposal value is expected. Jefferson Labs' required rate of return is 12%. Assume all cash flows occur at year-end except for initial investment amounts. Jefferson Labs uses straight-line depreciation. 1. Calculate the following for the special-purpose eye-testing machine: a. Net present value b. Payback period c. Internal rate of return d. Accrual accounting rate of return based on net initial investment e. Accrual accounting rate of return based on average investment 2. What other factors should Jefferson Labs consider in deciding whether to purchase the special-purpose eye-testing machine
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