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Use the following information to answer Multiple Choice Problems 16 to 24 Presto Pizza is considering replacing one of its pizza ovens with a new
Use the following information to answer Multiple Choice Problems 16 to 24 Presto Pizza is considering replacing one of its pizza ovens with a new model that would increase capacity and reduce operating costs compared to the old ovens. The new oven costs S50,000 today (att-0) and can be sold in 5 years for $10,000 (at t = 5). The old oven can be sold today for $5,000 and has a zero ($0) residual salvage in 5 years. Independent Consultants estimate that Presto Pizza's annual sales less operating expenses (not including taxes, depreciation, or adjustments for net working capital) will increase from currently $50,000/year to $75,000/year (at t= l to t = 5). They also estimate that net working capital will increase by $10,000 today (at t-0) to meet increased sales and will be recaptured completely at the end of year 5 (at t-5). The pizza oven belongs to asset class 43 with a CCA rate of 30%. Assume that Presto Pizza has a required rate of return of 10% and a corporate tax rate of 40%. Note: You don't need to find the present value of all cash flows. Calculate only the relevant numbers required to answer the questions below
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