Bob Jensen Inc. purchased a 5550.000 machine to manufacture specialty taps for electrical…

Bob Jensen Inc. purchased a 5550.000 machine to manufacture specialty taps for electrical equipment Jensen expects to sell all it can manufacture in the next 10 years To encourage capital investments, the government has exempted taxes on profits from new investments. This legislation is to be in effect for the foreseeable future. The machine is expected to have a 10-year useful life with no salvage value Jensen uses straight-line depreciation The net cash inflow is expected to be 5127,000 each year for 10 years Jensen uses a 12% discount rate in evaluating capital investments. Assume. for simplicity. that MACRS depreciation rules do not apply.

 

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