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Gaston Company is considering a capital budgeting project that would require a $2.700.000 investment in equipment with a useful life of five years and no
Gaston Company is considering a capital budgeting project that would require a $2.700.000 investment in equipment with a useful life of five years and no salvage value. The company's tax rate is 30% and its after-tax cost of capital is 13%. It uses the straight-line depreciation method for financial reporting and tax purposes. The project would provide net operating income each year for five years as follows: $3,1ee.ee 1,518,280 1,598,888 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out - of-pocket costs Depreciation Total fixed expenses Net operating income $65e.eee 540,880 1,190,000 $ 400,00 Click here to view Exhibit 13B-1 and Exhibit 13B-2. to determine the appropriate discount factor(s) using tables. Required: Compute the project's net present value. Net present value
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