You are considering buying a CNC machine. This machine will have an estimated service life of 10 years with a salvage value of 5% of the investment cost. Its annual net revenues are estimated to be $40,000. To expect a 15% rate of return on investment, what would be the maximum amount that you are willing to pay for the machine?(a) $213,065(b) $203,240(c) $249,998(d) $276,860

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Q: Answer

A: Part a: NPV at an 8% Discount RateThe NPV formula is:NPV=8∑t=1 19,000/(1+0.08)^t −105,000  the…

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A: Time = t = 8 YearsFuture Value = fv = $112,100Discount Rate = r = 11%

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A: Initial cost = $23,200 Annual saving = $4960 Salvage value = $3720 Required return = 12%   Net…

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A: Net Present value is present value of cash flow minus initial investment.

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A: Referencehttps://www.investopedia.com/terms/n/npv.asp

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A: Initial Outlay $ -95,000.00Net cash inflow $  16,000.00Tenure11YearsDiscount rate9%

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A:

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.