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ABC will purchase a machine that will cost $2,575,000. Shipping and installation will cost $375,000. The machine has an IRS approved useful life of 7
ABC will purchase a machine that will cost $2,575,000. Shipping and installation will cost $375,000. The machine has an IRS approved useful life of 7 years; it is presumed to have no salvage value. ABC plans to depreciate the machine by using the straight line method. The machine is expected to increase ABC's earnings before interest and taxes (EBIT) by $1,013,972 per year. Assume that the firm's tax rate is 409. In addition, ABC will need to invest 575,000 for additional inventory and recapture this investment at the end of year seven. What is the terminal cash flow (FCF) from the machine in year seven? $954.811 $997,464 $888,563 $1,104,811
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