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Lucy Lookster (LL) plans to buy a dressmaker. It costs $17,500 and is expected to last for five years. She presently hires 6 workers at
Lucy Lookster (LL) plans to buy a dressmaker. It costs $17,500 and is expected to last for five years. She presently hires 6 workers at $1,000 per month for each of the three peak months each year. The equipment would eliminate the need for two workers. LL uses straight-line depreciation and projects a salvage value of $2,500. Her tax rate is 25% and opportunity cost of funds is 3.3%. Considering this, which of the following statements is true? (a) The PV of cash flows in year 5 is $4,463 (b) NPV is $8,464 (c) NPV is $6,339 (d) NPV is $5,058
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