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Question: a company is considering whether to buy a new machine...

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A company is considering whether to buy a new machine, which costs $97,000. The cash flows (adjusted for taxes and depreciation) that would be generated by the new machine are given in the following table: Year Cash flow50, 000 $40,000 $ 25, 000$20,000 (a) Find the total present value of the cash flows. Treat each years cash flow as a lump sum at the end of the year and use an interest rate of 12.5% per year, compounded annually. Year Payment PresentValue 1 $50,000 71191.4 2 $40,000 50625 3 $25,000 28125 4 $20,000 20000 TOTAL 169941.4

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