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Rocky Mountain Sports Ltd is considering purchasing a new machine that costs $60,000. The machine will...

Rocky Mountain Sports Ltd is considering purchasing a new machine that costs $60,000. The machine will generate revenues of $100,000 per year for five years. The cost of materials and labour needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $2,500 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Rocky Mountain’s tax rate is 34 percent, and its opportunity cost of capital is 14.40 percent. What is the project's NPV? Should Rocky Mountain accept or reject the project?

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jeff jeffy answered 1 year ago
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