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You have been asked by the president and CEO of Kidd Pharmaceuticals to evaluate the proposed acquisition of a new labeling machine for one of
You have been asked by the president and CEO of Kidd Pharmaceuticals to evaluate the proposed acquisition of a new labeling machine for one of the firm's production lines. The machine's price is $ and it would cost another $ for transportation and installation. The machine falls into the MACRS threeyear class, and hence the tax depreciation allowances are and in Years and respectively. The machine would be sold after three years because the production line is being closed at that time. The best estimate of the machine's salvage value after three years of use is $ The machine would have no effect on the firm's sales or revenues, but it is expected to save Kidd $ per year in beforetax operating costs. The firm's tax rate is percent and its corporate cost of capital is percent.
What is the project's net investment outlay at Year ANSWER bFollowing from the previous questions, what is the project's operating cash flow in Year and C Following from the previous questions, what is the NPV of the project?
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