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e instructure.LU Use the following information for questions 1-5 Merry Christmas Company is considering buying a new machine that can reduce costs in making Christmas
e instructure.LU Use the following information for questions 1-5 Merry Christmas Company is considering buying a new machine that can reduce costs in making Christmas decorations. The new machine costs $80,000. It is in the 20% CCA class but offers no investment tax credit. The machine has a useful life of 5 years and can then be sold for salvage value of $23,000. The marginal income tax rate at Merry Christmas Co. is 40%. Operating the machine will require an increase in working capital of $14,000 during the 5 year period. This working capital will become available at the end of the project. The relevant cost of capital for discounting is 12%. What is the present value of the increase in working capital? 14.000 (14,000 (12.250 12.250
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