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A start-up biotech company is considering making an investment of $100,000 in a new filtration system. The associated estimates are summarized below: Annual receipts             $75,000 Annual expenses           $45,000 Useful life                      8 years Salvage value                $20,000 Straight line depreciation will be used, and the effective income tax rate is 20%. The MARR is 15% per year. Determine whether this investment is an attractive option for the company.

A start-up biotech company is considering making an investment of $100,000 in a new filtration system. The associated estimates are summarized below: Annual receipts             $75,000 Annual expenses           $45,000 Useful life                      8 years Salvage value                $20,000 Straight line depreciation will be used, and the effective income tax rate is 20%. The MARR is 15% per year. Determine whether this investment is an attractive option for the company.

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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A start-up biotech company is considering making an investment of $100,000 in a new filtration system. The associated estimates are summarized below:
Annual receipts             $75,000
Annual expenses           $45,000
Useful life                      8 years
Salvage value                $20,000

Straight line depreciation will be used, and the effective income tax rate is 20%. The MARR is 15% per year. Determine whether this investment is an attractive option for the company.

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