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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Thoma Pharmaceutical Company may buy an equipment costing $60,000. This equipment expected to reduce clinical staff labour costs by $ 20,000 annually. The equipment has a useful life of 5 years, but depreciation will be charged according to the following rates:
Year-1 33.33%
Â
Year-2 44.45%
Â
Â
Year-4 7.41%
No salvage value is expected at the end. The corporate tax rate for Thoma is 38 percent and its required rate of return is 15 percent. (If profits after taxes on the project are negative in any year, the firm will offset the loss against other firm income for that year.)What are the relevant Cash Flows?
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