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Homework answers / question archive / Riordan Corporation is interested in purchasing a state-of-the-art widget machine for its manufacturing plant
Riordan Corporation is interested in purchasing a state-of-the-art widget machine for its manufacturing plant. The new machine has been designed to basically eliminate all errors and defects in the widgetmaking production process. The new machine will cost $150,000, and have a salvage value of $70,000 at the end of its seven-year useful life. Riordan has determined that cash inflows for years 1 through 7 will be as follows: $32,000; $57,000; $15,000; $28,000; $16,000; $10,000, and $15,000, respectively. Maintenance will be required in years 3 and 6 at $10,000 and $7,000 respectively. Riordan uses a discount rate of 11 percent and wants projects to have a payback period of no longer than five years.
Present value tables or a financial calculator are required.
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