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A company is evaluating the purchase of a machine to improve product quality and output levels. The new machine would cost $811,000 and would be
A company is evaluating the purchase of a machine to improve product quality and output levels. The new machine would cost $811,000 and would be depreciated for tax purposes using the straight-line method over an estimated sixyear life to its expected salvage value of $50,000. The new machine would require an addition of $45,000 to wotking capital at the beginning of the project, which will of course be retarned to the firm at the end of the project. The machine would increase the company's annual pre-tax cash receipts by $247,000 from their curreat level. Cash operating costs pertaining to the machine will be $17,000 per yeac, In addition, at the end of the 4th year, a major repair of the machine costing $30,000 (pre-tax) would be required. The company has an overall cost of capital of 11%, and is in the 35% marginal tax bracket. Your answers to this open-ended assignment should be placed in the space be Your answers to this open-ended assignment should be placed in the space below this line. D Double click and put your answer here
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