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Capital Budgeting of New Machinery

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The Jackson Company is considering the purchase of a new machine that is expected to reduce cash outflows. The cost of this machine is $29,000. The annual reduction in cash outflows is as follows:
See attached doc.

If the cost of capital is 10%, please calculate the following:
- A. The Present Value of the Benefits (PVB) - Show your work.
- B. The Present Value of the Costs (PVC)
- C. Net Present Value (NPV) (Show your work)
- D. Should we buy the machine based on your above analysis? Please explain

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Solution Summary

The solution explains how to calculate Present Value of the Benefits (PVB), Present Value of the Costs (PVC) and Net Present Value (NPV) and make the purchase decision

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