The tax rate of wyoming coal company , Taxation

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Wyoming Coal Company is interested in buying a machine for $40,000, which it will depreciate uniformly over a four-year period. An analysis of the life expectancy of such machines reveals that 30% break down after 3 years, 60% run for 4 years, and 10% last for 5 years. The tax rate of Wyoming is 35% and its cost of capital is 9%. If the machine can generate $10,000 per year in pretax earnings, should Wyoming buy it?


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