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Pizza Planet Co. paid a consultant to study the desirability of installing some new equipment. The consultant submitted the following analysis:
Cost of new equipment | $50,000 |
Present value of after-tax revenues from operation | $45,000 |
Present value of after-tax operating expenses | $10,000 |
Present value of depreciation expenses | $43,750 |
Consulting fees and expenses | $375 |
The corporate tax rate is 40%. In a 1 page paper, explain whether Pizza Planet Co. should install the new equipment. Justify your response with supportive examples and references.
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