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Mojo Company purchased a new machine for $100,000 to be depreciated over 5 years. It will

Mojo Company purchased a new machine for $100,000 to be depreciated over 5 years. It will

 Mojo Company purchased a new machine for $100,000 to be depreciated over 5 years. It will have no salvage value at the end of its useful life. For both book and tax purposes, depreciation will be $20,000 per year. The machine is expected to produce annual cash inflows from operations, before income taxes, of $40,000. Assume that Mojo uses a discount rate of 12% and that its income tax rate will be 40% for all years. The present value of $1 at 12% for five periods is 0.57, and the present value of an ordinary annuity of $1 at 12% for five periods is 3.61. The NPV of the machine should be

Tripti 06-Dec-2019

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