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Jaguar Lawn Service is buys a small garden tractor for $20,000. There will be no maintenance cost during the first 2 years because the tractor is sold with 2 years free maintenance. For the third year, the maintenance is estimated at $80. In subsequent years, the maintenance cost will increase by $40 per year. The tractor is depreciated using MACRS for a 7-year depreciable life. Determine the NPW of the investment after 3 years if it is sold in the 3rd year for $12,000. Assume a tax rate of 40% and an interest rate of 10%.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92418395

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