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Wood Products Company would like to purchase a computerized wood lathe for $100,000. The machine is expected to have a life of 5 years, and
- Wood Products Company would like to purchase a computerized wood lathe for $100,000. The machine is expected to have a life of 5 years, and a salvage value of $5,000. Annual maintenance costs will total $20,000. Annual cash receipts resulting from this machine are predicted to be $45,000. The companys required rate of return is 15 percent.
- Use Excel to calculate the net present value. (7.2)
- Use Excel to calculate the internal rate of return. (7.3)
- Based on your answer from parts a) and b), should the company purchase the wood lathe? Explain. (7.2, 7.3, 7.4)
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