SavingsPlus Inc. is considering an investment in computer technology. The project would require an initial investment of
Question:
SavingsPlus Inc. is considering an investment in computer technology. The project would require an initial investment of \(\$ 240,000\) and have an expected life of six years with no salvage value. The pre-tax increase in income is expected to be \(\$ 55,000\) in each of the first four years and \(\$ 50,000\) in each of the next two years. The company's discount rate is 6 percent, its tax rate is 21 percent, and the investment would be depreciated for tax purposes using the straight-line method with no consideration of salvage value over a five-year period and for accounting purposes over a six-year period with no salvage value.
Calculate the after-tax NPV on the project.
Step by Step Answer:
Cost Accounting Foundations And Evolutions
ISBN: 9781618533531
10th Edition
Authors: Amie Dragoo, Michael Kinney, Cecily Raiborn