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Unformatted text preview: year class. The replacement machine would permit an output expansion, so sale would rise by $1,000 per year; even so, the new machine’s much greater efficiency would still cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,000, but accounts payable would simultaneously increase by $500. Tax rate is 40 percent, and its cost of capital is 15 percent. Should it replace the old machine?...
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This note was uploaded on 10/13/2010 for the course BUS 1231 taught by Professor Miko during the Spring '10 term at UC Riverside.
- Spring '10