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Capital Budgeting Decision Company ABC is considering buying a machine. The new machine is more efficient and can save money for the next 7 years.
Capital Budgeting Decision Company ABC is considering buying a machine. The new machine is more efficient and can save money for the next 7 years. The new machine has the capability to produce a new product, XYZ. This machine will need major rehaul at the end of year four. The useful life of the new machine is 7 years. At the end of the 7 year, it can be sold. Also, the new machine has the capability to produce a new product, XYZ. Use the information below to decide if Company ABC should purchase the machine. In less than 30 words, give the reasons for your decision. Cost of new Machine Annual savings from efficiency XYZ annual operating income Cost to rehaul new machine Selling price of machine at the end of 7th year $ 500,000 $ 60,000 assume the same for the next 7 years $ 100,000 assume the same for the next 7 years $ 12,600 $ 75,000 Income tax rate Cost of capital 40% assume the same for the next 7 years 14%
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