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if the cost of capital increased to 10% , the net present value of purchasing the new machine would decreased…..
How please explain it……….The NPV is the net surplus after accounting for interest. If the rate of interest goes up then the surplus is less, and the machine becomes less worthwhile.
I do suggest that you watch my free lectures – they are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.
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