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KINKY COPIES MAY BUY A HIGH-VOLUME COPIER. THE MACHINE COSTS

KINKY COPIES MAY BUY A HIGH-VOLUME COPIER. THE MACHINE COSTS

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http://theperfecthomework.com/kinky-copies-may-buy-a-high-volume-copier-the-machine-costs-210-000-and-will-be-depreciated-straight-line-over-5-years-to-a-salvage-value-of-38-000/

Kinky Copies may buy a high-volume copier. The machine costs $210,000 and will be depreciated straight-line over 5 years to a salvage value of $38,000. Kinky anticipates that the machine actually can be sold in 5 years for $49,000. The machine will save $38,000 a year in labor costs but will require an increase in working capital, mainly paper supplies, of $19,000. The firm’s marginal tax rate is 35%, and the discount rate is 7%. (Assume the net working capital will be recovered at the end of Year 5.)

  
Calculate the NPV. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

 
  NPV
$   
  
Should Kinky buy the machine?
 
Yes
No


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