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Problem 3. (60 points) A contractor manufacturing company purchased a production equipment for $450,000 to meet the specic needs of a customer that had awarded
Problem 3. (60 points) A contractor manufacturing company purchased a production equipment for $450,000 to meet the specic needs of a customer that had awarded a 4-year contract with the possibility of extending the contract for another 4 years. The company plans to use the MACRS depreciation method for this equipment as a 7-year property for tax purposes. The combined income tax rate for the company is 24%, and it expects to have an after-tax rate of return of 8% for all its investments. The equipment generated a yearly revenue of $90,000 for the rst 4 years. The customer decided not to renew the contract aer 4 years. Consequently, the company decided to sell the equipment for $220,000 at the end of 4 years. Answer the following questions
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