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10s.13 You are interested in purchasing a machine that will save $200,000 per year before taxes. The cost of operating the machine, including maintenance, is $80,000 per year. The machine, which costs $150,000, will be needed for five years after which it will have a salvage value of $25,000. The machine would qualify for a year MACRS property. What is the net present value of the cash flows generated from this machine at 15%? The firm's income tax rate is 40%. a. $123,554 b. $137,883 c. $131,852 d. $122,438

10s.13 You are interested in purchasing a machine that will save $200,000 per year before taxes. The cost of operating the machine, including maintenance, is $80,000 per year. The machine, which costs $150,000, will be needed for five years after which it will have a salvage value of $25,000. The machine would qualify for a year MACRS property. What is the net present value of the cash flows generated from this machine at 15%? The firm's income tax rate is 40%. a. $123,554 b. $137,883 c. $131,852 d. $122,438

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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10s.13 You are interested in purchasing a machine that will save $200,000 per year before taxes. The cost of operating the machine, including maintenance, is $80,000 per year. The machine, which costs $150,000, will be needed for five years after which it will have a salvage value of $25,000. The machine would qualify for a year MACRS property. What is the net present value of the cash flows generated from this machine at 15%? The firm's income tax rate is 40%. a. $123,554 b. $137,883 c. $131,852 d. $122,438
Transcribed Image Text:10s.13 You are interested in purchasing a machine that will save $200,000 per year before taxes. The cost of operating the machine, including maintenance, is $80,000 per year. The machine, which costs $150,000, will be needed for five years after which it will have a salvage value of $25,000. The machine would qualify for a year MACRS property. What is the net present value of the cash flows generated from this machine at 15%? The firm's income tax rate is 40%. a. $123,554 b. $137,883 c. $131,852 d. $122,438
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