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Your company has the opportunity to invest $10000 in a new piece of equipment that will generate the following benefits over the next 5

 

Your company has the opportunity to invest $10000 in a new piece of equipment that will generate the following benefits over the next 5 years: Year Benefit ($) 1 Year Tax Rate (%) 2 1 10 3 2487.78 2548.75 2487.78 2548.75 2487.78 They use straight-line depreciation and for estimating purposes, they expect the following tax rates on their taxable income for those 5 years: 2 20 4 3 4 10 20 5 5 10 Alternatively, they could invest the same $10000 in a supplier's business in exchange for a guaranteed after-tax annual return of 4.00% per year after 5 years. They do not have enough money to do both; that is, they will either pick the first option or the second option or neither. Using after-tax values and the topics covered in this class, what should your company do and why? You have to appropriately justify your answer in order to receive the full credit.

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