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The machine in Problem 1 will generate incremental revenues of $4 million per year along with incremental

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The machine in Problem 1 will generate incremental revenues of $4 million per year along with incremental costs of $1.2 million per year. If Daily’s marginal tax rate is 21%, what are the incremental earnings associated with the new machine? 


Data from in problem 1

Daily Enterprises is purchasing a $10 million machine. It will cost $50,000 to transport and install the machine. The machine has a depreciable life of five years and will have no salvage value. If Daily uses straight-line depreciation, what are the depreciation expenses associated with this machine?

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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue

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