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Zeon, a large profitable corporation, is considering adding some automatic equipment in its production facilities. An investment of $400,000 will produce an initial annual benefit
Zeon, a large profitable corporation, is considering adding some automatic equipment in its production facilities. An investment of $400,000 will produce an initial annual benefit of $174,000, but the benefits are expected to decline $2,000 per year. The firm uses Straight-Line depreciation, a 4 year useful life and $48,000 salvage value. Assume that the equipment can be sold for its $48,000 salvage value at the end of 4 years. Also assume a 46% income tax rate for state and federal taxes combined. The following After-Tax Cash Flow Table has been prepared. Is it correct? If not, why not? ( ) It is correct. It is incorrect. Wrong depreciation used. It is incorrect. The money made when the equipment is sold in not included in the last year's cash flow. It is incorrect. The after-tax cash flow is wrong
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