The president of Orlando Corporation has asked you to evaluate the proposed acquisition of new kitchen equipment for its five restaurants. The equipments price is $1,200,000 with shipping and installation costs of $300, 000. The equipment will be depreciated to a zero-salvage value over 10 years on a straight-line basis. Purchase of the equipment would require an increase in net operating working capital of $75,000. The equipment would increase the firm's before - tax revenues by $500,000 per year but would also increase operating costs by $200, 000 per year. The machine is expected to be used for 15 years and then sold for $100,000. The firm's marginal tax rate is 20%, and the project's cost of capital is 18%. Should the new machine be purchased? Show computations
The president of Orlando Corporation has asked you to evaluate the proposed acquisition of new kitchen equipment for its five restaurants. The equipments price is $1,200,000 with shipping and installation costs of $300, 000. The equipment will be
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