A manager of Destination Mutual Funds is contemplating acquiring servers to operate its website. The servers will cost $600,000 cash and will have zero terminal salvage value. The recovery period and useful life are both 3 years. Annual pretax cash savings from operations will be $260,000. The income tax rate is 30%,and the required after-tax rate of return is 12%.

Suppose the computers will be fully depreciated at the end o year 3 but can be sold for $60,000 cash. Compute NPV. Should Destination acquire the computers. Explain.

Requirement 2. Suppose the computers will be fully depreciated at the end of year 3 but can be sold for $60,000 cash. Compute the NPV. Should Destination acquire the computers? Explain. Begin by calculating the net present value of the computer in this scenario. (Round dollar amounts the nearest whole number. Use a minus sign or parentheses for a negative net present value. Enter the present value factor to four decimal places, "X.XXXX") Present Value of $1 Cash Total Present at 3 years, 12% Inflow Value NPV of invesment from requirement 1 Present value of lump sum after-tax cash flow from disposal of computers at the end of year 3 X Net present value