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Question: The ZZZ Company is considering investing in a new machine for one of its factories. The company has two alternatives to choose from:

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The life span of each machine is 5 years. ZZZ sells each unit for a price of $6. The company has a cost of capital of 12% and its tax rate is 35%.

a. If the company manufactures 1,000,000 units per year which machine should it buy?

b. Plot a graph showing the profitability of investment in each machine type depending on the annual production.

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