A small industrial machine costs $124 000 and is expected to earn annual
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A small industrial machine costs $124 000 and is expected to earn annual

A small industrial machine costs $124 000 and is expected to earn annual net cash inflows of $54600, $49 600, $44 600 and $39700, before it wears out sufficiently to be unreliable and must be sold for an estimated $12400.

Required

a. If funds earn 11 per cent, what is its NPV?

b. If funds earn 15 per cent, what is its NPV?

c. What is the IRR for the machine?

d. Advise management on the purchase of the machine.

Hint
Accounts & FinanceNPV or the Net present value is the difference between the cash inflows's present value and also the present value of cash outflows over a time period. It is used in the capital budgeting and the investment planning to analyze the profitability of a projected investment or the project.  To calculate the NPV, one needs to estimate the future cash flows for each period and...

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