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Accounting

Problem:

Community Health Center is considering spending $50,000 on a blood analyzer. The annual cash profits from the machine will be $7,000 for each of the 7 years of its useful life. The board of directors wants to pursue this investment, because they think the $49,000 CHC will receive is close to the $50,000 cost.

Required:

Question 1: What is wrong with the board's logic?

Question 2: What is the IRR on the investment?

Note: Show all workings.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91165969

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