Mid-Town Plumbers Inc.is considering the purchase of a machine costing approximately $4000.Using a discount rate of 20 per cent,the present value of future cash inflows are calculated to be $4000.To yield at least a 20 per cent return,the actual cost of the machine should not exceed the $4000 estimate by more than:

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Since the present value of future cash inflows equals the cost of the machine ($4000), the actual cost should not exceed this estimate at all to yield at least a 20% return. Any increase in cost would reduce the return below the desired 20%.