Question - On January 1, Mojo Company purchased a new machine for $100,000 to be depreciated over 5 years. It will have no salvage value at the end of its useful life. For both book and tax purposes, depreciation will be $20,000 per year. The machine is expected to produce annual cash inflows from operations, before income taxes, of $40,000. Assume that Mojo uses a discount rate of 12% and that its income tax rate will be 40% for all years. The present value of $1 at 12% for five periods is 0.57, and the present value of an ordinary annuity of $1 at 12% for five periods is 3.61. The NPV of the machine should be...?
a. $15,520 positive.
b. $15,520 negative.
c. $14,000 positive.
d. $13,680 negative.