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The owner of Cape Cod Confectionary is considering the purchase of a new semiautomatic candy machine. The machine will cost $24,000 and last 9 years.
The owner of Cape Cod Confectionary is considering the purchase of a new semiautomatic candy machine. The machine will cost $24,000 and last 9 years. The machine is expected to have no salvage value at the end of its useful life. The owner projects that the new candy machine will generate $4,500 in after-tax savings each year during its life (including the depreciation tax shield).
Required Compute the profitability index on the proposed candy machine, assuming an after-tax hurdle rate of: (a) 8 percent, (b) 10 percent, and (c) 12 percent. (Round your answers to 2 decimal places.) Profitability Index (a) 8 percent (b) 10 percent (c) 12 percentStep by Step Solution
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