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Acme Toy Company is considering the purchase of a machine for their production line. Information on the purchase is shown below 5 Calculate the initial
Acme Toy Company is considering the purchase of a machine for their production line. Information on the purchase is shown below 5 Calculate the initial outlay associated with the project. What is the annual after tax cash flows for years 1-9? 7 What is the terminal cash flow in year 10? Should the machine be purchased? Purchase Information: Cost of machine is $3 million dollars. Expected increase in EBIT $750000. Training costs for new machine-$250,000. Increase in inventory for new parts-$350,000 Salvage value of machine-$300,000 Expected life of machine-10 years, use straight line depreciation. Tax Rate-30% Required Rate of Return-12%
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