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A company is considering the acquisition of production equipment which will reduce both labor and materials costs. The cost is $ 1 1 0 ,
A company is considering the acquisition of production equipment which will reduce both labor and materials costs. The cost is $ and it will be depreciated on a straightline basis down to $ The useful life of the equipment is five years, and it will have a $ market value at the end of five years. Operating costs will be reduced by $ in the first year and the savings will increase by $ per year in years and Due to increased maintenance costs, savings in year five will be $ less than the year four savings. The equipment will also reduce net working capital by $ throughout the life of the project. The firm's tax rate is percent, and the required return is percent. What is the NPV of this project?
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