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You purchase a new machine tool for your firm. It costs $5,000 and will expand your business cash flow by $1,115/year in year 1 and
You purchase a new machine tool for your firm. It costs $5,000 and will expand your business cash flow by $1,115/year in year 1 and these will grow by 3.5% per year. The system will work for 10 years before you have to replace it. What are the NPV (use a 6% discount rate) and IRR? The vendor offers you an extended warranty costing $10,000 on top of the purchase price. This warranty extends the lathe's life by 10 years. a. What are the NPV and the IRR of the machine with the extended warranty? b. Should you get it?
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