An illustration of NPV with Taxation A company is considering whether or not to purchase an item of machinery costing $40,000 payable immediately. It would have a life of 4years, after which it would be sold for $5,000. The machinery would create annual cost savings of $14,000. The company pays tax one year in arrears at an annual rate of 30% and can claim tax-allowable depreciation on a 25% reducing balance basis. A balancing allowance is claimed in the final year of operation. The company's cost of capital is 8%. Should the machinery be purchased