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Your company is contemplating the purchase of a large stamping machine. The machine will cost $195,000. With additional transportation and installation costs of $4,000
Your company is contemplating the purchase of a large stamping machine. The machine will cost $195,000. With additional transportation and installation costs of $4,000 and $9,000, respectively, the cost basis for depreciation purposes is $208,000. Its MV at the end of five years is estimated as $39,000. The IRS has assured you that this machine will fall under a three year MACRS class life category. The justifications for this machine include $46,000 savings per year in labor and $33,000 savings per year in reduced materials. The before-tax MARR is 16% per year, and the effective income tax rate is 25%. What is the PW of the after-tax savings from the machine, in labor and materials only, (neglecting the first cost, depreciation, and the salvage value)? Use the after tax MARR. Choose the nearest answer below. A. The PW of the after-tax savings is $284,800. B. The PW of the after-tax savings is $59,000. C. The PW of the after-tax savings is $33,600. D. The PW of the after-tax savings is $213,600. E. The PW of the after-tax savings is $124,000.
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