Question
A computer lab that costs $800,000 is expected to operate for 8 years. The estimated salvage value at the end of 8 years is $70,000.
A computer lab that costs $800,000 is expected to operate for 8 years. The estimated salvage value at the end of 8 years is $70,000. The lab is expected to increase the company's revenue by $100,000 per year and also decrease by $30,000 in annual operating costs before taxes and depreciation. The company will depreciate this system on a 7-year MACRS schedule. If the firm's cost of capital is 14% and its marginal tax rate is 21%, compute the NPV and the IRR for the project. Should the company accept this project? (7-YEAR MACRS schedule: 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, 8.92%, 8.93%, 4.46%)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started