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Kinky Copies may buy a high-volume copier. The machine costs $130,000 and will be depreciated straight-line over 5 years to a salvage value of $22,000.
Kinky Copies may buy a high-volume copier. The machine costs $130,000 and will be depreciated straight-line over 5 years to a salvage value of $22,000. Kinky anticipates that the machine actually can be sold in 5 years for $30,000. The machine will save $22,000 a year in labor costs but will require an increase in working capital, mainly paper supplies, of $11,000. The firms marginal tax rate is 35%, and the discount rate is 6%. (Assume the net working capital will be recovered at the end of Year 5.)
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