The Max Aussie Ltd. is considering the purchase of a new machine that would increase thespeed of bottling and save money. The net cost of this machine is $250,000. The machine isexpected to last 5 years and will be depreciated to zero by year 5 using the straight-linemethod. The company's required rate of return is 10 per cent and the expected paybackperiod is 2.5years. The annual cash flows have the following projections.YearCash Flow2............3............5............(b)$70,00080,00090,00080,00020,000Calculate the net present value of the new machine.

A capital budget is a tool for evaluating two or more projects. The tool helps business owners…

Answered: 2............ 3.............…

2............ 3............. 4............. 5............ (b) autred 80,000 90,000 80,000 20,000 Calculate the net present value of the new machine.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The Max Aussie Ltd. is considering the purchase of a new machine that would increase the
speed of bottling and save money. The net cost of this machine is $250,000. The machine is
expected to last 5 years and will be depreciated to zero by year 5 using the straight-line
method. The company's required rate of return is 10 per cent and the expected payback
period is 2.5years. The annual cash flows have the following projections.
Year
Cash Flow
2............
3............
5............
(b)
$70,000
80,000
90,000
80,000
20,000
Calculate the net present value of the new machine.

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