Question: A corporation is considering purchasing a machine that has an expected eight-year life and will generate for the firm $11,000 per year in net operating

A corporation is considering purchasing a machine that has an expected eight-year life

and will generate for the firm $11,000 per year in net operating income before taxes.

The machine will be depreciated using the straight-line method to its anticipated

salvage value of $12,000. The firm has a 34% marginal tax rate and the required return

for this project is 12% p.a. If the machine costs $60,000, should it be purchased?

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