Question
Creighton Industries is considering the purchase of a new strapping machine, which will cost $120,000, plus an additional $7500 to ship and install. The new
Creighton Industries is considering the purchase of a new strapping machine, which will cost $120,000, plus an additional $7500 to ship and install. The new machine will have a 5-year useful life and will be depreciated to zero using the straight-line method. The machine is expected to generate new sales of $25000 per year and is expected to have a salvage value of $30000. Creighton uses a 13.5% discount rate for capital budgeting purposes the firm's income tax rate is 40%. What is the machine's NPV? A.) $12,153 B.) $5,062 C.) $8,888 D.) $25,000
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