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18. Thornley Machines is considering a 3-year project with an initial cost of $400,000. The project will not directly produce

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E D 26 Initial Cost 27 Benefit 28 sale 29 Tax 30 Depreciation 400000 175000 100000 0.35 =+E26/3 Year Outflow Benefit After Ta
Year Outflow Benefit After Tax Tax saving on Depreciation Sale Value After Tax Total Benefit PVF @ 12% Present Value
0 -400000                -                            -   0         -4,00,000                  1.00 -4,00,000.00
1 113750                46,667 0          1,60,417                  0.89    1,43,229.17
2 113750                46,667 0          1,60,417                  0.80    1,27,883.18
3 113750                46,667 65000          2,25,417                  0.71    1,60,447.13
NPV        31,559.48

Ans : E i,e project should be implemented since the NPV is positive. ( $ 31,559.48)

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