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Pique Corporation Wants to Purchase a New Machine for $300,000

question 133

Multiple Choice

Pique Corporation wants to purchase a new machine for $300,000.Management predicts that the machine can produce sales of $200,000 each year for the next 5 years.Expenses are expected to include direct materials,direct labor,and factory overhead (excluding depreciation) totaling $80,000 per year.The firm uses straight-line depreciation with no residual value for all depreciable assets.Pique's tax rate is 40%.Management requires a minimum 10% rate of return on all investments.
What is the amount of net income (after taxes) in Year 2 of the investment?

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Understand the stages of the new-product development process and their importance in converting business opportunities into salable products or services.

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