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Problem:

Raphael Restaurant is considering the purchase of a $9,900 soufflé maker. The soufflé maker has an economic life of six years and will be fully depreciated by the straight-line method. The machine will produce 1,950 soufflés per year, with each costing $2.35 to make and priced at $5.20. Assume that the discount rate is 14 percent and the tax rate is 40 percent.

Required:

Question 1: What is the NPV of the project?

Question 2: Should Raphael make the purchase?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167497

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