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Use this information to answer questions below: Cost Cutting: CBD Inc, a processor of CBD oils,...

Use this information to answer questions below: Cost Cutting: CBD Inc, a processor of CBD oils, is analyzing a potential opportunity to cut costs. It can spend $1.5 Million today on the purchase and installation of a new automated processing line. The equipment will have a six-year life, at which time it can be sold for $250,000. The equipment qualifies as a Class 8 asset with a 20% CCA rate. Since the equipment will be purchased in 2020, it is subject to the Accelerated Investment Incentive rules, rather than the half-year rule. The benefit of installing the new equipment is a reduction in labor costs of $400,000 per year. The new process will lead to an immediate increase in Net Working Capital (NWC) of $25,000, which will be recovered at the conclusion of the project. The firm has a 30% corporate tax rate and it wants a 15% return. Should they undertake this cost-cutting program?

What is the correct value for Step #1? $1,500,000, $400,000, $1,525,000, $250,000

What is the correct value for Step #2? $1.059,655, $1,135,950, $1,366,245, $1,263,755

What is the correct value for Step #3? $376,650, $452,640, $273,913, $650,545

What is correct value for Step #4? $123,690, $85,631, $108,082, $98,654

What is correct value for Step #5? $18,528, $17,397, $20,635, $16,412

What is the correct value of Step #6? -$15,648, -$14,192, -$18,354, $17,369

What is the correct value for step #7? Reject- NPV is negative, Accept- NPV is positive, Accept NPV is negative, Reject- NPV is positive

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jeff jeffy answered 1 year ago
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