IN CLASS EXAMPLE USING MACRS DEPRECIATION

LMU, Inc. has an investment opportunity involving the following cash flows:

Cost of new equipment $..$

Working capital required

Net annual cash receipts for $8$ years

Equipment repairs in $4$ years $q,$

Salvage value of equipment $q,$

The following additional information is available:

Equipment's estimated useful life: $8$ years

MACRS property class: $5-$year property class

After$-$tax cost of capital: $10\%$

Income tax rate: $30\%$

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