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ABC Company is considering developing a new product. This new product would require the company to initially purchase $10 million dollars in machinery and equipment
ABC Company is considering developing a new product. This new product would require the company to initially purchase $10 million dollars in machinery and equipment and invest $4 million in training and development. The machinery and equipment will be depreciated over five years. The new product will generate $15 million of incremental revenue and $8 million in incremental costs. ABCs tax rate is 35%. Assuming ABCs cost of capital is 8% should they invest in this project or not?
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