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Valuing an Asset for the Purpose of Making a Purchasing Decision Sid Patel owns a service station and has the opportunity to purchase a car-wash...

Valuing an Asset for the Purpose of Making a Purchasing Decision

Sid Patel owns a service station and has the opportunity to purchase a car-wash machine for $15,000. After carefully studying projected costs and revenues, Patel estimates that the car-wash machine will produce a net cash flow of $2,600 annually and will last for eight years. He determines that an interest rate of 14 percent is adequate for his business.

Note: The following Table 2 on present value may be used where appropriate to solve this problem.

  1. Calculate the net present value of the machine to Patel. Round your answer to the nearest cent.$   Is your answer positive or negative?SelectnegativepositiveItem 2
  2. Does the purchase appear to be a smart business decision?SelectYesNoItem 3

Top Answer

The way to approach this... View the full answer

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2 comments
  • the NPV isnt right but the other two answers are
    • Jmokrzycki
    • Mar 18, 2017 at 8:37pm
  • nevermind it was correct, I just needed to round to the nearest decimal point =)
    • Jmokrzycki
    • Mar 18, 2017 at 9:28pm

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