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Metlock, Inc. is considering the purchase of a new machine for $530000 that has an estimated useful life of 5 years and no salvage value.
Metlock, Inc. is considering the purchase of a new machine for $530000 that has an estimated useful life of 5 years and no salvage value. The machine will generate net annual cash flows of $92750. 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 Year Present Value of 1 at 8% .926 .857 PV of an Annuity of 1 at 8% .926 1.783 2.577 3.312 3.993 .794 .735 .681 $16205 per year. O $39982 per year. O $39724 per year. $20197 per year
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