3. A company buys a machine for $500,000 and depreciates it on a straight-line basis over...

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3. A company buys a machine for $500,000 and depreciates it on a straight-line basis over a five-year period for tax purposes. The investment would result in pre-tax cash cost savings of $200,000 per year, for five years. At the end of 5 years, it is estimated that the machine can be sold for $75,000. The gain on the sale of the machine would be taxed at a 40% tax rate. Is the investment in the machine attractive in economic terms, given all of the cash flows? You can assume that the appropriate discount rate equals 8%. What is the Net Present Value, the IRR, and the (Discounted) Payback Period? 3. A company buys a machine for $500,000 and depreciates it on a straight-line basis over a five-year period for tax purposes. The investment would result in pre-tax cash cost savings of $200,000 per year, for five years. At the end of 5 years, it is estimated that the machine can be sold for $75,000. The gain on the sale of the machine would be taxed at a 40% tax rate. Is the investment in the machine attractive in economic terms, given all of the cash flows? You can assume that the appropriate discount rate equals 8%. What is the Net Present Value, the IRR, and the (Discounted) Payback Period?

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To determine if the investment in the machine is attractive in economic terms we need to calculate t... View the full answer