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Kinky Copies may buy a high-volume copier. The machine costs $100,000 and will be depreciated straight-line over 5 years to a salvage value of $20,000.
Kinky Copies may buy a high-volume copier. The machine costs $100,000 and will be depreciated straight-line over 5 years to a salvage value of $20,000. Kinky anticipates that the machine can be sold in 5 years for $30,000. The machine will save $20,000 a year in labour costs but will require an increase in working capital, mainly paper supplies, of $10,000. The firm's marginal tax rate is 35%. Ignore the CCA system and assume that the straight-line depreciation method adopted by Kinky Copies will suffice for tax purposes. Should Kinky buy the machine? The discount rate is 8%. (Click to select) Kinky Copies may buy a high-volume copier. The machine costs $100,000 and will be depreciated straight-line over 5 years to a salvage value of $20,000. Kinky anticipates that the machine can be sold in 5 years for $30,000. The machine will save $20,000 a year in labour costs but will require an increase in working capital, mainly paper supplies, of $10,000. The firm's marginal tax rate is 35%. Ignore the CCA system and assume that the straight-line depreciation method adopted by Kinky Copies will suffice for tax purposes. Should Kinky buy the machine? The discount rate is 8%. (Click to select)
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