(Chapter 8):XYZ rapid prototyping (RP) software costs $20,000, lasts one year, and will be expensed...
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Accounting
(Chapter 8):XYZ rapid prototyping (RP) software costs $20,000, lasts one year, and will be expensed (i.e. written off in one year). The cost of upgrade will increase 10% per year, starting at the beginning of year two. How much can be spent now for an RP software upgrade agreementthat lasts three years and must be depreciated with the SL method to zero over three years? MARR is 20% per year (im), and the effective income tax rate (t) is 34%.Draw the cash flow diagramsbased on ATCFfor both options.(Points 25)
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