Advantage Milling Devices is preparing to buy a new machine for precision milling of special metal alloys. This device can earn $200 per hour, and can run 3,000 hours per year. The machine is expected to be this productive for four years. If the interest rate is 5%, what is the net present value of the annual cash flows? What is the net present value if the interest rate is not 5%, but 8%? Why does present value fall when interest rates rise?

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The Answer of Advantage Milling Devices is preparing to buy a new machine for precision milling of special metal alloys. This device can earn $200 per hour, and can run 3,000 hours per year. The machine is expected to be this productive for four years. If the interest rate is 5%, what is the net present value of the annual cash flows? What is the net present value if the interest rate is not 5%, but 8%? Why does present value fall when interest rates rise?

Advantage Milling Devices Is Preparing to Buy a New Machine