4. Baird Bros. Construction is considering the purchase of a machine $250,000. The machine is expected to generate cash flows of $40,0 for 10 years and can be sold at the end of 10 years for $10,000. Int Assume the machine purchase would be paid for on the first day of that all other cash flows occur at the end of the year. Ignore income
4. Baird Bros. Construction is considering the purchase of a machine $250,000. The machine is expected to generate cash flows of $40,0 for 10 years and can be sold at the end of 10 years for $10,000. Int Assume the machine purchase would be paid for on the first day of that all other cash flows occur at the end of the year. Ignore income
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:4. Baird Bros. Construction is considering the purchase of a machine at a cost of
$250,000. The machine is expected to generate cash flows of $40,000 per year
for 10 years and can be sold at the end of 10 years for $10,000. Interest is at 9%.
Assume the machine purchase would be paid for on the first day of year one, but
that all other cash flows occur at the end of the year. Ignore income tax
considerations.
Required:
a. What is the Net Present Value of the cash flows?
b. Should Baird Bros. Construction purchase the machine? Explain.
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