Edwin Ogden owns a service station and has the opportunity to purchase a car wash machine for $15,000. After carefully studying projected costs and revenues, Ogden estimates that the car wash machine will produce a net cash flow of $2,600 annually and will last for eight years. He determines that an interest rate of 14 percent is adequate for his business. Calculate the present value of the machine to Ogden. Does the purchase appear to be a smart business decision? Explain your answer.
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