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benefits of $20 period. An initi. $600,000 wou install the new manager estim machine can b $400,000.

benefits of $20 period. An initi. $600,000 wou install the new manager estim machine can b $400,000.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The Investment manager of Summer Corp requested you to assess an investment equipment proposal. The firm intends to replace an old equipment with a new one. The production manager believes that replacing an old machine with a new one will produce total benefits of $375,000 over the next 6 years. The old equipment produces benefits of $200,000 over the same period. An initial cash investment of $600,000 would be required to install the new equipment. Also, the manager estimates that the old machine can be sold at a price of $400,000.
Transcribed Image Text:The Investment manager of Summer Corp requested you to assess an investment equipment proposal. The firm intends to replace an old equipment with a new one. The production manager believes that replacing an old machine with a new one will produce total benefits of $375,000 over the next 6 years. The old equipment produces benefits of $200,000 over the same period. An initial cash investment of $600,000 would be required to install the new equipment. Also, the manager estimates that the old machine can be sold at a price of $400,000.
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