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Firm ABC is considering investing in a project to reduce costs by $60,000 annually. The equipment costs $200,000, had a 4-year life (will be depreciated
Firm ABC is considering investing in a project to reduce costs by $60,000 annually. The equipment costs $200,000, had a 4-year life (will be depreciated as a 3-year MACRS asset: 33% for the first year, 45% for the second year, and 15% for the third year), requires no additional investment in net working capital, andhas a salvage value of $40,000. The required rate of return is 10%. Tax rate is 34%. For #3 & #4 below. What is the FCF each year? What are the NPV and IRR? Do you accept the project? Why
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