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The president of Duck Phone Company has asked you to evaluate the proposed acquisition of a new router. The router would be housed in an
The president of Duck Phone Company has asked you to evaluate the proposed acquisition of a new router. The router would be housed in an empty building that Drake bought ten years ago for $400,000 and is depreciating using straight-line over twenty years. The new routers is $600,000 and it is classified in the 3-year MACRS class. The purchase of the router would not require any change in working capital. The router would increase the firm's before-tax revenues by $200,000 per year, but would also increase operating costs by $50,000 per year. The router is expected to be used for three years and then sold at the end of the third year for $100,000. The firm's marginal tax rate is 40%. The net cash flow for the third year of this project is closest to ... O $201,000 O $203,000 O $200,000 O $202,000
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