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Calculate the net present value of the proposed investment

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Reference no: EM132838783

Question - The Johnson Company estimates that it can save $2,100 per year in operating costs over the next five years if it buys a new machine at a cost of $6,000. The machine will have no residual value, and the required rate of return is 12 percent.

Required -

a. Calculate the net present value of the proposed investment in the new machine.

b. Do you recommend that Ellis purchase the machine? Why?

c. Assuming that the new machine would save only $1,500 per year for five years, recalculate the net present value. Do you recommend purchase? Why?

Reference no: EM132838783

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