Question

Arnold Jones owns a carpentry shop and has the opportunity to purchase a new machine for $45,000. After carefully studying projected costs and revenues, Jones estimates that the new machine will produce a net cash flow of $10,800 annually and will last for seven years. Jones believes that an interest rate of 9 percent is adequate for his business.
Calculate the present value of the machine to Jones.
Does the purchase appear to be a smart business decision? Explain your answer.



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  • CreatedSeptember 10, 2014
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