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April 18, 2015

Homework Help: economics

Posted by Christopher on Sunday, October 25, 2009 at 4:40pm.

Determine the highest purchase price that a company could afford to pay for the new harvester and still have a positive Net Present Value project. These are the facts:

There is an 5 year old harvester with 10 years of life remaining, it was purchased for $54,000 and has been depreciated by the straight line method to a zero residual value. It could be sold for 36,000 today.

The new harvester is not expected to affect revenues but before tax operating expenses will fall by $18,000 per year for 10 years. It will also be depreciated by the straight line method to a zero residual value in 10 years.

The MARR is 12%, the marginal corporate tax rate is 30%, and is expected to stay that way. Captival gains and losses are taxed at the corporate rate of 15% when they are realized.

HELP!!!

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