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Bar Company is considering an investment in equipment that is expected to generate an after-tax income of $6,000 for each year of its four-year life.
Bar Company is considering an investment in equipment that is expected to generate an after-tax income of $6,000 for each year of its four-year life. The asset has no salvage value. The firm is in the 40% tax bracket. The net book value (NBV) of the investment at the beginning of each year will be as follows:
Year 1 $ 30,000
Year 2 15,000
Year 3 7,500
Year 4 3,750
The projected after-tax cash inflow generated by the asset in Year 3 is:
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