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Answer the following questions using the information below:
Cronulla Cleaners is considering the purchase of an industrial dry-cleaning machine.The existing machine is operable for three more years and will have a zero disposal price.The machine may be sold for $50 000 now.The new machine will cost $200 000 and an additional cash investment in working capital of $50 000 will be required.The new machine will reduce the average time required to wash clothing and will decrease labour costs.The investment is expected to net $45 000 in additional cash inflows during the year of acquisition and $135 000 each additional year of use.The new machine has a three-year life,and zero disposal value.These cash flows will occur throughout the year but will be recognised at the end of each year.Income taxes are not considered in this problem.The working capital investment will not be recovered at the end of the asset's life.
-What is the net present value of the investment,assuming the required rate of return is 10%? Would the company want to purchase the new machine?
Age Of Viability
The age at which a premature baby is capable of surviving outside the womb with medical support, typically around 24 weeks of gestation.
Germinal Period
The initial two weeks of prenatal development following conception, characterized by rapid cell division and the beginning of cell differentiation.
Placenta
An organ that develops in the uterus during pregnancy, providing oxygen and nutrients to the growing baby while removing waste.
Implantation
The process by which a fertilized egg attaches itself to the wall of the uterus, beginning the stages of pregnancy.
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