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A company is considering an investment (at time = 0) in a machine that produces pans. The cost of the machine is 46606 dollars with zero expected salvage value. Annual production in units during the 3-year life of the machine is expected to be (starting at time = 1) 4572, 7234, and 10258. The sale price per pan is 14 dollars in year one, and then expected to increase by 5% per year. Production costs per unit will be 6 dollars in year one, and then expected to increase by 5% per year. Depreciation on the machine is 13656 dollars per year, the tax rate is 40% and the minimum acceptable rate of return is 15% percent.

Required:

Question: Calculate the net present value of this investment. Assume all flows are at the end of each year.

Note: Please provide through step by step calculations.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91169560

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