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problem: The Danforth Tire Company is considering the purchase of a new machine that would increase the speed of manufacturing and save money. The net cost of this machine is 66,000 dollars. The yearly cash flows have the following projections.

Year

Cash flows

1

$21,000

2

$29,000

3

$36,000

4

$16,000

5

$8,000

[A] Determine the internal rate of return?

[B] Should the project be accepted? describe?

[C] If the cost of capital is 10%, determine the net present value?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M916914

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