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Question 1 Cytex Corporation is considering the purchase of a new machine to replace an existing one. The old machine was purchased 4 years ago
Question 1 Cytex Corporation is considering the purchase of a new machine to replace an existing one. The old machine was purchased 4 years ago at a cost of RM30,000.00 and it is being depreciated on a straight-line basis to a zero salvage value over an 8-year life. The current market value of the old machine is RM12,000.00. The new machine, which falls into the MACRS 3-year class, has an estimated life of 4 years, it costs RM35,000.00 and Cytex plans to sell the machine at the end of the fifth year for RM1,000.00. The applicable depreciation rates are 0.33, 0.45, 0.15 and 0.07 Investment in operating capital is expected to increase by RMI,000.00 and is expected to be fully recovered at the end of the project. The new machine is expected to generate g the projer's sconic hie The company's tax rate is 40 percent. Is the replacement viable? Use NPV and IRR to decide
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