Question
2. DigCo is considering the purchase of a backhoe for the pipeline contracting firm. The machine will cost $110,000, last six years with a
2. DigCo is considering the purchase of a backhoe for the pipeline contracting firm. The machine will cost $110,000, last six years with a salvage value of $20,000, and reduce annual maintenance, insurance, and labour costs by $30,000 per year. The after tax MARR is 9% and DigCo's corporate tax rate is 55% (a) What is the exact after tax IRR for this investment? (5 marks) (b) Should Digco buy the backhoe? (2 marks)
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Financial Accounting Theory and Analysis Text and Cases
Authors: Richard G. Schroeder, Myrtle W. Clark, Jack Cathey
11th edition
9781118806500, 1118582799, 1118806506, 978-1118582794
