Paragas, Inc., is considering the purchase of a machine that would cost $370,000 and would last for 8 years. At the end of 8 years, the machine would have a salvage value of $52,000. The machine would reduce labor and other costs by $96,000 per year. Additional working capital of $4,000 would be needed immediately. All of this working capital would be recovered at the end of the life of the machine. The company requires a minimum pretax return of 19% on all investment projects. (Ignore income taxes.)See separate Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided.The net present value of the proposed project is closest to:
A. $22,532
B. $78,530
C. $19,528
D. $9,584
Answer: C
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An intangible asset with a determinable useful life should be amortized over that useful life
Indicate whether the statement is true or false
Grant Manufacturing is considering investing in equipment that costs $70,000. The equipment would be depreciated using the straight-line method with no half-year convention over seven years and have no salvage value. If the company has a 40 percent income tax rate and desires an after-tax rate of return of 14 percent on investments, the total present value of the depreciation tax shield is:
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