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A new textbook printing press costs $4,250,000 and could be depreciated at 30% per year. The press can be sold for $860,000 in five years.
A new textbook printing press costs $4,250,000 and could be depreciated at 30% per year. The press can be sold for $860,000 in five years. The new press would save the firm $865,000 before taxes in operating costs per year for five years. Suppose that there is no impact on net working capital and that there are no capital gains taxes/losses to worry about. The firm's weighted average cost of capital is 15% and the corporate tax rate is 40%. What is the total present value of the after-tax operating cost savings that the press will bring (ignoring depreciation)? a) $2,018,729 b) $2,500,734 Oc) $1,739,768 d) $1,482,579 e) $2,899,614
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