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Problem 22-15 Management of Braden Boats, Inc. is considering an expansion in the firm's product line that requires the purchase of an additional $157,000 in
Problem 22-15 Management of Braden Boats, Inc. is considering an expansion in the firm's product line that requires the purchase of an additional $157,000 in equipment with installation costs of $20,000 and removal expenses of $2,000 (Note: the removal expenses are considered terminal cash flows). The equipment and installation costs will be depreciated over five years using straight-line depreciation. The expansion is expected to increase earnings before depreciation and taxes as follows: Years 1 and 2 Years 3 and 4 Year 5 $ 66,000 $ 61,000 $ 71,000 The firm's income tax rate is 30 percent and the weighted average cost of capital is 8 percent. Based on the net present value method of capital budgeting, should management undertake this project? Use Appendix B to answer the question. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar. NPV: $ The firm should make the investment
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