A Firm Is Considering Purchasing a New Machine,which Costs $600,000

question 124

Essay

A firm is considering purchasing a new machine,which costs $600,000 and has a six-year life,a CCA rate of 25 percent,and an expected salvage value of $40,000.The asset class will remain open.The project will generate sales revenue of $200,000 in the first year,which will grow at 6 percent per year in the subsequent years.Variable costs will be $80,000 for the first year,which will grow at 7 percent per year.The firm's marginal tax rate is 35 percent and required return is 10 percent.
A) Calculate the present value of CCA.
B) Calculate the present value of ending cash flow.
C) Calculate the present value of after-tax cost and revenue.
D) Calculate the NPV.
E) Should the project be accepted?

• A) Calculate the present value of CCA.
• B) Calculate the present value of ending cash flow.
• C) Calculate the present value of after-tax cost and revenue.
• D) Calculate the NPV.
• E) Should the project be accepted?

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Definitions:

Sexual Health Issues

Problems related to sexual function, reproductive health, and sexually transmitted infections, as well as the promotion of healthy sexual relationships.

Chlamydia

A common sexually transmitted infection (STI) caused by the bacterium Chlamydia trachomatis, which can lead to severe reproductive and other health problems if untreated.

Spermicide

A substance used to kill sperm, utilized as a form of contraceptive.

Bloodborne Exchange

An exchange or transfer of blood or its components, often referring to the transmission of diseases through contact with infected blood.