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The Chang Company is considering the purchase of a new machine to replace an obsolete one. The current machine has a useful life of 8
The Chang Company is considering the purchase of a new machine to replace an obsolete one. The current machine has a useful life of 8 years and a depreciation of $3000 per year. The proposed machine costs $40000 and will last for 8 years. The $40000 will be 100% depreciated over a straight line basis for 8 years. The new machine is expected to perform more efficiently and will produce a before tax cost savings of 9000 a year. The firms cost of capital is 10 percent and has a tax rate of 35 percent. Should Chang buy the new machine
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