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Your firm needs a CNC lathe which costs $50,000, and requires $12,000 in maintenance for each year of its three-year life. After three years, this lathe will be replaced. The machine falls into the MACRS three-year class life category. Assume a tax rate of 15 percent and a cost of capital (financing rate) of 9 percent. Calculate the depreciation tax shield for this project in year 3. If the lathe can be sold for $5,000 at the end of year 3, what is the after-tax salvage value? [Show your processes].

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92802468

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