Question

Luke Ricci owns a machine shop and has the opportunity to purchase a new machine for $60,000. After carefully studying projected costs and revenues, Ricci estimates that the new machine will produce a net cash flow of $14,400 annually and will last for eight years. Ricci believes that an interest rate of 10 percent is adequate for his business.
Calculate the present value of the machine to Ricci. Does the purchase appear to be a smart business decision? Why?



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  • CreatedMarch 26, 2014
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