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please dont cut off answer The Cato Corporation currently uses an injection molding machine that was purchased prior to the new tax legislation. This machine
please dont cut off answer
The Cato Corporation currently uses an injection molding machine that was purchased prior to the new tax legislation. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,100, and it can be sold for $2,500 at this time. Thus, the annual depreciation expense is $2,100/6 = $350 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Cato is offered a replacement machine which has a cost of $8,000, an estimated useful life of 6 years, and an estimated salvage value of $800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase. The replacement machine would permit an output expansion, so sales would rise by $1,000 per year; even so, the new machine's much greater efficiency would cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,000, but accounts payable would simultaneously increase by $500. Cato's marginal federal-plus-state tax rate is 25%, and its WACC is 11%. The firm's tax rate is 25%. The appropriate WACC is 9%. The firm's tax rate is 25%. The appropriate WACC is 9%.What is the NPV of this project? (round to nearest dollar) 0 - $317.38 O $2,475.48 O $1,797.89 O $2,568.06 0 $3,384.35 Step by Step Solution
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