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Should the company purchase the machine

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A company is considering buying a machine for $2 million that would reduce its annual net operating costs by $275,000 over the next ten years. The machine would be worthless after ten years. The company applies a discount rate of 7 percent for this type of investment.

-Should the company purchase the machine?

-What is your answer to question (a) if the annual reduction in costs rises by 7 percent per year?

-What is the minimum reduction in annual net operating costs that would justify the investment?

-What is the highest discount rate that would justify the investment?

Reference no: EM133074025

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