useful life of 7 years with no salvage value. The machine is expected to generate cash flow, net of taxes, of $80,000 in each of the next 7 years. Bozo’s expected rate of return is 12%. Information on present value factors is as follows.
Present value of $1 at 12% for seven periods 0.452
Present value of an ordinary annuity of $1 at 125 for seven periods 4.564
Assuming a positive net present value of $12,720, what was the original cost of the machine?
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