Compute the net present value for each machine

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Question - L Company is considering two new machines that should produce considerable cost savings in its assembly operations. The cost of each machine is $14,000 and neither is expected to have a salvage value at the end of a 4-year useful life. L Company's required rate of return is 12% and the company prefers that a project return its initial outlay within the first half of the project's life. The annual after-tax cash savings for each machine are provided in the following table:

Required -

a) Compute the payback period for each machine.

b) Compute the net present value for each machine.

c) Which machine should be purchased?

Reference no: EM133091580

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