Question
Question 8 [5 pts] Suppose that the cash-generating machine you are considering buying in Question 6 has stopped for improvement. It will resume generating cash
Question 8 [5 pts]
Suppose that the cash-generating machine you are considering buying in Question 6 has stopped for improvement. It will resume generating cash flows in two years from now, with an initial cash flow of $10. Cash flows will then grow at a rate of 4% each year thereafter. The discount rate is 12% per year. You are still interested in purchasing this machine, and the current owner of the machine asks you to pay today if you want to buy it. How much would you be willing to pay?
Answer (show the steps/calculation toward your results):
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