X Company is considering the purchase of a new machine. The machine would reduce the amount of part-time labor, at a cost savings of $17,090 per year. In addition, the machine would enable the company toincrease production and sales of one of its products by 2,000 units; contribution margin of this product is $5.30 per unit. The machine would cost $150,000, last for five years, and have zero salvage value atthe end of its life.Assuming a discount rate of 7%, what is the net present value of buying the new machine?Submit AnswerTries 0/4If the new machine will last for six years instead of five, what is the approximate internal rate of return of buying it? [enter your answer as .XX, so 1% would be .01]Submit AnswerTries 0/4

NPV = $36,465 Working - Calculation of NPV Year Cashflows Present value factor(7%) Present value…

Answered: Assuming a discount rate of 7%, what is…

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Assuming a discount rate of 7%, what is the net present value of buying the new machine?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 28P: Friedman Company is considering installing a new IT system. The cost of the new system is estimated...

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Question

X Company is considering the purchase of a new machine. The machine would reduce the amount of part-time labor, at a cost savings of $17,090 per year. In addition, the machine would enable the company to
increase production and sales of one of its products by 2,000 units; contribution margin of this product is $5.30 per unit. The machine would cost $150,000, last for five years, and have zero salvage value at
the end of its life.
Assuming a discount rate of 7%, what is the net present value of buying the new machine?
Submit Answer
Tries 0/4
If the new machine will last for six years instead of five, what is the approximate internal rate of return of buying it? [enter your answer as .XX, so 1% would be .01]
Submit Answer
Tries 0/4

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