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In: Accounting

A company, whose earnings put them in the 35% tax schedule, is considering purchasing a piece...

A company, whose earnings put them in the 35% tax schedule, is considering
purchasing a piece of equipment for $25,000. The equipment should be depreciated using straight line depreciation, has a useful life of 4 years and a salvage value of $5,000. It is estimated that the equipment will increase the company’s earnings by
m $7,500 for each of the 4 years. Should the equipment be purchased? Use an after tax interest rate of 10%.

(please dont copy paste excel tables)
Clearly present the cash flow diagram, equivalency model, and
assumptions made and detailed calculations

Solutions

Expert Solution

ekkarill92 answered 2 years ago
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