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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