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Author Question: Advantage Milling Devices is preparing to buy a new machine for precision milling of special metal ... (Read 112 times)

anjilletteb

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Question 1

A new machine tool is expected to generate receipts as follows: $5,000 in year one; $3,000 in year two, nothing in the next year, and $2,000 in the fourth year. At an interest rate of 6%, what is the present value of these receipts? Is this a better present value than $2,500 each year over four years? Explain.

Question 2

Advantage Milling Devices is preparing to buy a new machine for precision milling of special metal alloys. This device can earn $300 per hour, and can run 3,000 hours per year. The machine is expected to be this productive for four years. If the interest rate is 6%, what is the present value? What is the present value if the interest rate is not 6%, but 9%? Why does present value fall when interest rates rise?


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Marked as best answer by anjilletteb on Dec 3, 2019

reelove4eva

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anjilletteb

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Reply 2 on: Dec 3, 2019
Excellent


lcapri7

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Reply 3 on: Yesterday
Great answer, keep it coming :)

 

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