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show your calculation and equation clearly a EX 2: The River Ltd is considering the purchase of a drafting machine to produce products. The purchase
show your calculation and equation clearly
a EX 2: The River Ltd is considering the purchase of a drafting machine to produce products. The purchase price (not including VAT) is $2,000,000, VAT 10%, the productive life of machine is 10 years. If using this machine, it will provide a future incremental benefit $250,000 per year. Salvage of old machine is $20,000 at the end of year 10. The seller requires immediate payment of $1,000,000 and the remainder is deferred for the next three years, $400,000 each year. Required: Calculate NPV, Payback period of this project? Give advice to the manager? This company uses straight line depreciation, income tax rate is 20%, discount rate is 12%, VAT will be paid back after one yearStep by Step Solution
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