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Unformatted text preview: $120,000 Life 4 System B: Cost $540,000 Pretax annual operating cost $80,000 Life 6 Both: Tax rate 34% Discount rate 20% *Depreciation staight-line Output area: System A: OCF $(42,650) NPV $(540,409.53) System B: OCF $(22,200) NPV $(613,826.32) If the system will not be replaced when it wears out, then System A should be chosen, because it has the more positive NPV....
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This note was uploaded on 07/24/2009 for the course FIN FIN taught by Professor Robbani during the Spring '09 term at University of Maryland Baltimore.
- Spring '09