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Delta, Inc.is considering the investment of $75,000 in a new machine.The machine will generate cash flow of $16,800 per year for each year of its seven-year life and will have a salvage value of $12,000 at the end of its life.Delta Inc.'s cost of capital is 14% percent.
(a.)Calculate the net present value of the proposed investment.Ignore income taxes, and round all answers to the nearest $1.
(b.)What will the internal rate of return on this investment be relative to the cost of capital? Explain your answer.
Elastic Demand
a demand scenario where the quantity demanded of a good or service significantly changes in response to a change in its price.
Profitable
Generating revenue that exceeds the costs and expenses involved in operating.
Long-Run Equilibrium
Long-run equilibrium occurs in a market when supply equals demand over time, allowing all participants to adjust fully to any changes.
Average Total Cost
The total cost of production (fixed and variable costs combined) divided by the quantity of output produced.
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