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2. Carbide Chemical Company is considering the replacement of two old machines with a new, more efficient machine. It has determined that the relevant after-tax incremental operating cash flows of this replacement proposal are as follows:

 
   

(Cashflows(Cashflows(Cashflows(Cashflows atatatat the)the)the)the) ENDENDENDEND OFOFOFOF YEARYEARYEARYEAR

 
   

0

1

2

3

4

5

6

7

8

   

(404,424.00)

86,890.00

106,474.00

91,612.00

84,801.00

84,801.00

75,400.00

66,000.00

92,400.00

   

What is the project’s net present value if the required rate of return is 14 percent? Is the project acceptable?

 
 

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Discount factor

 

1.00

0.88

0.77

0.67

0.59

0.52

0.46

0.40

0.35

Discounted Cash flow

-

404,424.00

76,219.30

81,928.29

61,835.49

50,209.00

44,042.98

34,351.23

26,376.06

32,391.66

NPVNPVNPVNPV

2,930.002,930.002,930.002,930.00

Since NPV is positive, the project should be acceptable.