A cloth manufacturing firm is deciding whether or not to invest in new machinery. The machinery costs $45,000 and is expected to increase cash flows in the first year by $25,000 and in the second year by $30,000 . The firm's current fixed costs are $9,000 and current marginal costs are $15 . The firm currently charges $18 per unit. If the interest rate is 5% then the present value of the cash flows is

a. $6,020.41
b. $51,020.41
c. -$7,380.95
d. $10,000


Ans: b. $51,020.41

Economics

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