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New machine costs $6000 and is expected to have no salvage value on retirement. The machine will be depreciated for tax purposes in three

 

New machine costs $6000 and is expected to have no salvage value on retirement. The machine will be depreciated for tax purposes in three years by the sum of the year's digits method. It is expected to generate an annual revenue of $15000 for the next three years and to require an annual operating cost of $6000(excluding depreciation of the machine. Tax rate is 40 percent. A) Compute the net cash investment of the project (or the cost of the project)? B) How would the net cash flow of each year be changed if the firm used the double declining balance method?

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