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A company is deciding whether to lease or purchase an asset. Inthis question we will evaluate the NPV of the purchasedecision.The capital cost required to purchase the asset is $1,000,000(at time zero) with a salvage value of $500,000 at the end of the5th year. The purchased asset can be depreciated based on MACRS5-year life depreciation with the half year convention (table A-1at IRS) over six years (from year 0 to year 5).The asset would yield annual revenue of $350,000 for five years(from year 1 to year 5) and operating cost of $60,000 for year 1 to5. If the income tax is 40% and the annual discount rate is 16%,calculate the NPV for the purchase decision
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