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The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines and have asked the accountant to analyze them
The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines and have asked the accountant to analyze them to determine which of the proposals (if any) meet or exceed the companys policy of a minimum desired rate of return of 10% using the net present value method. Each of the assets has an estimated useful life of 10 years. The accountant has identified the following data:
Machine A | Machine B | Machine C | |
Present value of future cash flows computed using 10% rate of return | $305,000 | $295,000 | $300,000 |
Amount of initial investment | 300,000 | 300,000 | 300,000 |
Which of the investments are acceptable?
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