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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 $ today. Its value will depreciate to zero evenly over years. In year you are able to sell the equipment for $ You expect to generate $ in accounts receivable and $ 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 $ in year and increase by $ each year after. In years and your revenue from the new operations will be $ In years and revenue will be $ Assuming a tax rate of and a discount rate of what is the NPV of buying the equipment? Should you accept the project?
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