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Making Capital Investment Decisions Isaac, Inc . is thinki ng about purchas ing a new machine . The new machi ne would cost $150,000 with an additional $30,000 f or deliver of the machine. The machine will have a life of 5 ears and will be depreciat ed using the straight line method. The machine can  be sold for $!5,000 at the end of its life. This machine is e"pected to produce cost savings of $35,000 the first two ears and $50,000 per ear after . It will take a $10,000 ad#u stment to net workin g capital if the machi ne is pur chas ed. The compan has a reuired return of %& and i s in the 35& ta" bracket . 'alculate the ()* of the pro#ect and determine if the compan should purchase the machine. +e ar 1 ! 3 5 'ost -avings epreciation /IT Ta"es  (et Income '2 +e ar 0 1 ! 3 5 '2 'hange in  (' 'apital Investment  (et '2

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Making Capital Investment Decisions

Isaac, Inc. is thinking about purchasing a new machine. The new machine would cost$150,000 with an additional $30,000 for deliver of the machine. The machine will havea life of 5 ears and will be depreciated using the straight line method. The machine can

 be sold for $!5,000 at the end of its life. This machine is e"pected to produce costsavings of $35,000 the first two ears and $50,000 per ear after. It will take a $10,000ad#ustment to net working capital if the machine is purchased. The compan has areuired return of %& and is in the 35& ta" bracket. 'alculate the ()* of the pro#ect anddetermine if the compan should purchase the machine.

+ear 1 ! 3 5

'ost -avings

epreciation

/IT

Ta"es

 (et Income

'2

+ear 0 1 ! 3 5

'2

'hange in ('

'apitalInvestment

 (et '2