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Mick Company is considering acquiring a machine that costs $20,000. It is estimated that the...

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Accounting

Mick Company is considering acquiring a machine that costs $20,000. It is estimated that the machine will generate additional revenues of $10,000 per year for 5 years. The machine will depreciated over 5 years utilizing the straight line method.

1. Assuming an average tax rate of 30% and a 14% cost of capital, compute the after tax net present value.

2. Should Mick Company acquire the machine? Why or why not?

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