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kindly answer questions 3 and 4! thank you 3) A firm considers to buy a machine in 2020. The cost of that machine is $

image text in transcribed kindly answer questions 3 and 4! thank you
3) A firm considers to buy a machine in 2020. The cost of that machine is $ 5 000 000. The firm uses 5 year straight line depreciation which allows it to write off $ 1 000 000 depreciation expense each year. The firm is subject to 20% corporate tax rate. The firm's revenue in 2021 is expected to be $ 6 000 000 if the investment is not done. The revenue will be $ 9 000 000 if the investment is done. The firm's total costs (including both COGS and General& Administrative Costs) will be $ 4 000 000 if the investment is not done. The total costs will be $ 5 500 000 if the investment is done. Also the following information is given for the year 2021 Without Investment With Investment Inventories $ 300 000 S 500 000 Acc. Receivables $ 200 000 $ 300 000 Acc. Payables $ 100 000 $ 150 000 Given the above information; calculate the free cash flow of that investment for the years 2020 and 2021. 4) The firms use both Net PV method and IRR (Internal Rate of Return) Method to evalauate investments. The IRR method, however, have some problems. The three problems cited regarding IRR are a) Re-investment assumption b) Multiple Root Problem c) Unconventional Cash Flow Problem. What are these problems? Explain these problems clearly by giving examples if necessary

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