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Unformatted text preview: Assume a 40 percent tax rate. What is the net present value of the new oven? Scomi Engineering Company Sdn Bhd is considering the purchase of a new machine to replace an existing one. The old machine was purchased 5 years ago at a cost of $20,000, and it is being depreciated on a straight-line basis to a zero salvage value over a 10-year life. The current market value of the old machine is $14,000. The new machine, which falls into the MACRS 5-year class, has an estimated life of 5 years, it costs $30,000, and Scomi plans to sell the machine at the end of the fifth year for $1,000. The applicable depreciation rates are 0.20, 0.32, 0.19, 0.12, 0.11, and 0.06. The new machine is expected to generate before-tax cash savings of $3,000 per year. The company's tax rate is 40 percent. What is the IRR of the proposed project?...
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This note was uploaded on 12/12/2011 for the course ECONOMICS 101 taught by Professor Thoman during the Spring '09 term at Abu Dhabi University.
- Spring '09