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Accounting

Problem:

Adams Incorporated wants to buy a new machine, which costs $240,000. Adams will depreciate it fully over its useful life of 6 years, on a straight-line basis. It will then sell the machine for $20,000. Adams has income tax rate of 32% and it uses a discount rate of 12%.

Required:

Question: Calculate the minimum pre-tax annual earnings generated by this machine to justify its purchase.

Note: Provide support for rationale.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91170981

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