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Bob Cratchit, a new analyst at Scrooge & Marley Inc., has prepared a capital budget for the Tiny Tim project. He is scheduled to present
Bob Cratchit, a new analyst at Scrooge & Marley Inc., has prepared a capital budget for the Tiny Tim project. He is scheduled to present his analysis at a board meeting in one hour. Bob just received an email from his boss, Fred Fezziwig, indicating that the capital budget is missing a critical piece of machinery with a capital cost of $ The machine would be purchased at the outset of the project Year The machinery is in Class with a depreciation rate of The machine will be sold for $ at the end of the twoyear project. The tax rate is and the weighted average cost of capital is No other element of the capital budget would be affected. Assume that all cash flows occur at yearend except for the purchase of equipment What is the reduction in NPV associated with the inclusion of the missing machinery? Round your answer to the nearest dollar.
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