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The WuShock Company is considering the purchase of a new machine to replace an obsolete one. The machine being used for the operation has a
The WuShock Company is considering the purchase of a new machine to replace an obsolete one. The machine being used for the operation has a book value and a market value of zero. However, the machine is in good working order and will last at least another 5 years. The proposed replacement machine will perform the operation so much more efficiently that WuShocks engineers estimate that it will produce an increase in after-tax cash flows (labor savings and depreciation) of $6000 per year, and will not have an effect on net working capital. The new machine will cost $25,000 delivered and installed, and its economic and depreciation life is estimated to be 5 years. It has zero salvage value. The firm's WACC is 8%, and its marginal tax rate is 15% What is the NPV of this replacement project? Round your answer to full dollars. a. $20,363 O b. - $1,044 O c. $23,956 O d. - $4,637
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