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Calculate the net present value of the investment

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ABC Company can borrow money for capital improvements at 6%. It is evaluating whether it should invest in a piece of machinery that will generate cash savings for the company of $30,000 per year for 10 years. At that point, the equipment will be worn out, but it can be scrapped for $20,000.00. The cost to purchase the machinery is $200,000.00, which will be a cash transaction.

Problem (a) Using the textbook tables, calculate the Net Present Value of this Investment (pre-tax basis).

Problem (b) Using EXCEL's NPV function, calculate the Net Present Value of this Investment (pre-tax basis)

Problem (c) What is the internal rate of return on this investment (pre-tax basis)?

Reference no: EM132820745

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