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Publix is buying a new conveyor system for its produce unloading operation at its Auburn Hamilton Road store. The first cost of the system is
Publix is buying a new conveyor system for its produce unloading operation at its Auburn Hamilton Road store. The first cost of the system is $100,000 (at time 0) and the useful life is 8 years. To buy the conveyor, Public pays $50,000 in cash (at time 0) from retained earnings and takes out a loan for $50,000 for 5 years for which it pays 10% APR and equal payments are made once a year at the end of each year. The expected salvage value of the system at the end of the 8 years is $10,000. For depreciation purposes, Publix uses MACRS and the conveyor system is designated as a 5 year property class. Publix's income tax rate is 40%. The expected benefits and maintenance costs are listed below by year: Year Benefits 5,000 10,000 25,000 25,000 25,000 25,000 25,000 20,000 Maintenance Costs 1,000 2,000 4,000 5,000 6,000 7,000 8,000 5,000 2 MARR 4 7 8 Calculate the after tax cash flows of the conveyor system for each of the eight years
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