A division of Cullumber Manufacturing is considering purchasing for $1,530,000 a machine that automates the process...

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A division of Cullumber Manufacturing is considering purchasingfor $1,530,000 a machine that automates the process of insertingelectronic components onto computer motherboards. The annual costof operating the machine will be $51,000, but it will save thecompany $377,000 in labor costs each year. The machine will have auseful life of 10 years, and its salvage value in 10 years isestimated to be $306,000. Straight-line depreciation will be usedin calculating taxes for this project, and the marginal corporatetax rate is 32 percent. If the appropriate discount rate is 12percent, what is the NPV of this project?

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SolutionThe NPV of the project 1084557 10846 when rounded off to the See Answer

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A division of Cullumber Manufacturing is considering purchasingfor $1,530,000 a machine that automates the process of insertingelectronic components onto computer motherboards. The annual costof operating the machine will be $51,000, but it will save thecompany $377,000 in labor costs each year. The machine will have auseful life of 10 years, and its salvage value in 10 years isestimated to be $306,000. Straight-line depreciation will be usedin calculating taxes for this project, and the marginal corporatetax rate is 32 percent. If the appropriate discount rate is 12percent, what is the NPV of this project?