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Consider the following investment project: purchasing a production machinve for $50 000, cash inflows of $20 000 in year 1, $30 000 in year 2,
Consider the following investment project: purchasing a production machinve for $50 000, cash inflows of $20 000 in year 1, $30 000 in year 2, $10 000 in both years 3 and 4. Calculate the NPV of the project assuming the machine is worthless after 4 years. Should you purchase the machine? Assume the machine can be depreciated at a yearly rate of 25% and CIT of 20%. Recalculate the NPV of the project. Keep in mind depreciation is tax deductible and the company does pay taxes.
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