Alternative should be accepted using present value analysis

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An industrial firm can purchase a special machine for $20,000. A down payment of $2,000 is required and the balance can be paid in 5 equal year-end installments plus 7% interest on the unpaid balance. As an alternative the machine can be purchased for $18,000 in cash. If the firm’s minimum attractive rate of return is 10%, determine which alternative should be accepted using a present value analysis.

Reference no: EM13885178

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