A manufacturing company is considering purchasing a new machine for their production line. The machine has an
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Question:
A manufacturing company is considering purchasing a new machine for their production line. The machine has an initial cost of $120,000 and a useful life of 5 years. It is expected to generate annual cash flows of $30,000 for the first year, increasing by 10% each year. The company's cost of capital is 12%. Should the company invest in the machine? Use the net present value (NPV) method to make the decision and show all calculations.
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