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Find should the company purchase the saw

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Question 1: Snowy Hills Lumber Ltd is considering purchasing a new wood saw that costs $50 000. The saw will generate revenues of $120,000 per year for 5 years. The cost of materials and labour needed to generate these revenues will total $68,000 per year, and other cash expenses will be $14,000 per year. The machine is expected to will be depreciated on a straight-line basis over 5 years to zero. Snowy Hills Lumber's opportunity cost of capital is 12 per cent. Should the company purchase the saw? Explain why or why not.

Reference no: EM132511848

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