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Carver Corporation is planning to buy a machine costing $50,000, and it will depreciate it fully along a straight line over 5 years. The machine
Carver Corporation is planning to buy a machine costing $50,000, and it will depreciate it fully along a straight line over 5 years. The machine will generate unknown earnings before interest and taxes (EBIT) which will remain constant for the first 5 years and then drop in half that value during the next 5 years. The tax rate is 30% and the discount rate is 10%. Calculate the EBIT for the machine to break even and have zero NPV.
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