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Business, 31.03.2020 00:14 babydogdog4375

You must evaluate a proposal to buy a new milling machine. The base price is $108,000 and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33, 45, 15, and 7 percent as discussed in Appendix 12A. The machine would require a $5,500 increases in working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pre-tax labor costs would decline by $44,000 per year. The marginal tax rate is 35 percent, and the WACC is 12 percent. Also, the firm spent $5,000 last year investigating the feasibility of using the machine. What is the net cost of the machine for capital budgeting purposes, that is, the Year 0 project cash flow

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You must evaluate a proposal to buy a new milling machine. The base price is $108,000 and shipping a...
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