Simone company is considering the purchase of a new machine costing $50,000. it is expected to save $9,000 cash per year for 10 years, has an estimated useful life of 10 years, and no salvage value. management will not make any investment unless at least an 18% rate of return can be earned. using the net present value method, determine if the proposal is acceptable. assume all tax effects are included in these numbers.

Answers

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answer: b) the us is the leading importer but not the leading exporter.

extra info:

the u.s is the largest importer but it is not the largest exporter as china sits on the top of the table when it comes to leading exporters.

but u.s is not far from first,

they rank in 2nd globally as the worlds largest exporter.

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At the rate of return of 18%, the purchase of the new machine is not convenient.

Explanation:

Giving the following information:

Simone Company is considering the purchase of a new machine costing $50,000. It is expected to save $9,000 cash per year for 10 years, has an estimated useful life of 10 years, and no salvage value. Management will not make any investment unless at least an 18% rate of return can be earned.

We need to find the net present value using the following formula:

NPV= -Io + ∑[Cf/(1+i)^n]

Cf= cash flow

NPV= -50,000 + 9,000/1.18 + 9,000/1.18^2 + 9,000/1.18^3 + ... + 9,000/1.18^10

NPV= -9,553

At the rate of return of 18%, the purchase of the new machine is not convenient. It will produce a loss in value.



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