Bayleaf Inc

question 23

Essay

Bayleaf Inc.is considering the purchase of a machine that costs $250 000.The machine is expected to generate revenues of $85 000 per year for five years.The machine would be depreciated using the straight-line method over a five-year life and have no salvage value.The company considers the impact of income taxes in all of its capital investment decisions.The company has a 40 per cent income tax rate and desires an after-tax rate of return of 12 per cent on its investment.
Required: Compute the net present value of the machine.

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Definitions:

Specialty Product

Products that are unique, high-quality, or branded, which consumers seek out and purchase with specific intention.

Discretionary Product

A non-essential good or service that consumers may choose to buy when they have disposable income, often susceptible to economic fluctuations.

Shopping Product

A type of product that consumers buy after comparing quality, price, and style from different sellers.

Convenience Product

Goods or services that are readily available to consumers and require minimal effort to purchase, such as everyday household items.