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2. A machine is purchased for $500,000. The service life of this machine is 10 years, over which it is expected to increase the annual
2. A machine is purchased for $500,000. The service life of this machine is 10 years, over which it is expected to increase the annual revenue by $170,000. To buy this machine $200,000 is borrowed at an interest rate of 5% per year, and it should be paid back in 6 equal annual payments. Given the declining balance depreciation method and a tax rate of 40%, answer the following questions: (17 points) (a) How much of the third loan payment is principal payment and how much is interest payment? (7 points) (b) Determine the taxable income for the third year. (5 points) (c) Determine the after-tax cash flow for the third year. (5 points)
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