Question 3) ABC Corp. purchased a machine costing $10,000 for its manufacturing plant...
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Question 3) ABC Corp. purchased a machine costing $10,000 for its manufacturing plant at Austin. The machine has a useful life of 5 years. The revenue generated by the machine and maintenance costs for the 5 years are as given below. Years 4-5 $5,000 $3,000 Years 1-3 Revenue $6,000 Maintenance costs S1,000 The company uses the straight-line method for depreciation and assumes zero salvage when computing the depreciation charges for this machine. In fact, due to shortage of this equipment in the market, the actual salvage for the machine will be $1000 at the end of 5 years. The tax rate is 50% for all incomes (including the capital gain on the salvage value). a. Compute the before and after tax flows for this company associated with this project b. Do this problem assuming SOYD depreciation. c. Do this problem assuming double rate declining balance depreciation
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