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Use this information for the next 3 questions:
Lugar Industries is considering an investment in a new machine with the following information:
Machine cost 250,000
Salvage value 50,000
Life 5 years
Working Capital $0 (no working capital needed)
Net operating expense savings:
End of Year 1 $ 50,000
End of Year 2 $ 90,000
End of Year 3 $110,000
End of Year 4 $120,000
End of Year 5 $120,000
WACC 10%
Tax rate 40%
Assumed salvage
value of the machine
at end of 5 years is $50,000 (You will sell this machine at the end of the project for $50,000)
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