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Jumbo Industries Is Considering the Purchase of Equipment Costing $80,000

Question 181

Multiple Choice

Jumbo Industries is considering the purchase of equipment costing $80,000.The company has a 12% required minimum rate of return.The equipment is expected to generate $20,000 in additional operating income.Jumbo's tax rate is 25% and its weighted-average cost of capital is 12%.What is the equipment's EVA?


A) $2,400
B) $5,400
C) $7,200
D) $9,600

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