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A company is evaluating a continuous baking oven. New oven would cost $685,000, including cost of equipment, shipping and installation. No increase in capcity with new oven, however operating expenses would be reduced by $105,000. 7 year MACRS schedule to a value of zero will be used, however the oven can be sold in year 10 for $30,000. Cost will increase by 5% per year over the 10 year economic life. Given partial balance sheet: Current liabilities= $1,000,000; Mortage Bond= $5,143,000; Common Stock(500,000 shares)= $500,000; Contributed capital in excess of par= 2,000,000; Retained earnings= $8,640,210; total liablities and common equity= $17,283,210 Cost of capital= 11.27% Tax Rate= 35% What is the NPV of the oven?

Financial Management, Finance

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