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Calculating project NPV: Jenny's Creamery is considering the purchase of a $27,000 ice cream maker. The ice cream maker has an economic life of eight
Calculating project NPV: Jenny's Creamery is considering the purchase of a $27,000 ice cream maker. The ice cream maker has an economic life of eight years. Using the straight-line method, it will be fully depreciated. The machine will produce 250,000 servings per year, with each costing $1.25 to make, and priced at $1.99. The discount rate is 12 percent. The tax rate is 35 percent. Should the company make the purchase? Provide a rationale using the calculations.
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