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A pharmaceutical company wants to buy new equipment costing $800 to buy the equipment and require $ 200 more to install the equipment. The equipment
A pharmaceutical company wants to buy new equipment costing $800 to buy the equipment and require $ 200 more to install the equipment. The equipment is expected to generate the revenue in first year equals to 682 and is expected to grow at 10% annually for next 4 years. The equipment has useful life of 5 years but falls in three years property class for cost recovery (depreciation) purpose. 20% of the revenue is fixed cost and variable cost is 15% of the revenue. The estimated final salvage value is $100. Tax rate for the firm is 38%. a. What is the initial cash outflow? b. What is interim incremental cash flow? c. What is terminal cash flow
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