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You're pondering buying a new piece of equipment which costs $ 8 0 , 0 0 0 today. Its value will depreciate to zero evenly

You're pondering buying a new piece of equipment which costs $80,000 today. Its value will depreciate to zero evenly over 4 years. In year 4, you are able to sell the equipment for $15,000. You expect to generate $5,000 in accounts receivable and $2,000 of inventory today, which will remain constant until the fourth year when both accounts receivable and inventory decrease to zero. Additional costs associated with the labor, maintenance, space, and electrical needs of the equipment would be $30,000 in year 1 and increase by $5,000 each year after. In years 1 and 2, your revenue from the new operations will be $60,000. In years 3 and 4, revenue will be $50,000. Assuming a tax rate of 40% and a discount rate of 7%, what is the NPV of buying the equipment? Should you accept the project?

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