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Compute the payback period for the machine

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Question - Central Coffee Co. is considering purchasing a new coffee roaster that would cost $425,000 and have a useful life of 8 years. The machine would reduce variable operating costs by $132,000 per year and require a significant overall costing $50,000 at the end of the 5th year. The roaster has an estimated salvage value of $35,000. Required: Compute the net present value of the machine assuming that the Company's required rate of return on capital investments is 10%. Should the Company purchase the machine? your answer change if the required rate of return was 16%? (Support your answers with detailed calculations.) a. Would b. Compute the payback period for the machine.

Reference no: EM131903473

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