Project valuation tools problem

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Reference no: EM13971968

Project Valuation Tools Problem

ACME Company is interested in buying a new machine that costs $500,000. It is projected that sales for the first year will be $350,000 and will increase each year by 15%. Variable costs are estimated to be 60% of sales with a onetime repair cost of $25,000 in year 4. The machine will have a useful life of 5 years, the tax rate = 33% and the discount rate is 10%. Using the valuation tools you’ve learned (payback, discounted payback, NPV, IRR, PI), recommend if the company should invest in this machine.

Reference no: EM13971968

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