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( 25 points) Joanette, Inc., is considering the purchase of a machine that would cost$240,000 and would last for 5 years, at the end of
( 25 points) Joanette, Inc., is considering the purchase of a machine that would cost$240,000 and would last for 5 years, at the end of which, the machine would have a salvage value of $48,000. Increases in the quality and quantity of the output of the machine would increase sales by $38,000 per year. The machine would reduce labor and other costs by $62,000 per year. A maintenance check and part replacement program would cost $10,000 at the end of year 3. An additional investment in working capital of $7,000 would be needed immediately, all of which would be recovered at the end of 5 years. The company requires a minimum after tax return of 10% on all investment projects. The company average tax rate is 30% and straight-line depreciation is acceptable for tax purposes. Required: Determine the net present value of the project. Should it be approved? Show your work
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