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12 September, 11:56

Barney Googal owns a garage and is contemplating purchasing a tire retreading machine for $11,820. After estimating costs and revenues, Barney projects a net cash inflow from the retreading machine of $2,700 annually for 7 years. Barney hopes to earn a return of 11% on such investments Click here to view the factor table (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What is the present value of the retreading operation? (Round answer to 2 decimal places, e. g. 25.25.) Present value Should Barney Googal purchase the retreading machine?

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  1. 12 September, 12:00
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    A, 902.94

    Explanation:

    Calculate present value:

    Present value = (Present value of annual cash flow-Present value of outflow) = (2700*4.71220) - 11820 = 902.94

    b) Barney Googal Should purchase the retreading machine.
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