Question
A company has purchased a machine that will increase it's before tax revenue by $300,000 per annum. This machines cost $2,000,000. Its installation will cost
A company has purchased a machine that will increase it's before tax revenue by $300,000 per annum. This machines cost $2,000,000. Its installation will cost $400,000. It requires $300,000 in working capital for its smooth operations. The machine depreciation will allow for full recovery in 5 years at a rate of 30%, 25%, 20%, 15%, and 10% in each year respectively. The company is expecting to sell the machine at the end of year 4, its tax rate is 30% and its cost of capital will be 10%. Show the impact of the company's year 4 operations on its investment.
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