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Xavier co. wants to purchase a machine for $37,000 with a for your life and $1000...

Xavier co. wants to purchase a machine for $37,000 with a for your life and $1000 salvage value. Xavier requires an 8% return on investment. The expected year and net cash flow‘s are $12,000 in each of the four years. What is the machines net present value (round to the nearest whole dollar)? calculate the net present value of the proposed project. Should the company invest in this machine? Why or why not?
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Answer #1
Amount PV factor Present value
Annual net cash flows 12000 3.3121 39745
Salvage value 1000 0.7350 735
Less: Investment cost -37000
Net present value 3480
Net present value = $3480
The company should invest in this machine as net present value is positive.
Positive net present value indicates that the rate of return earned on machine is more than 8%
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