A manager of Hasting Mutual Funds is contemplating acquiring servers to operate its website. The servers will cost $1,050,000 cash and will have zero terminal salvage value. The recovery period and useful life are both 7 years. Annual pretax cash savings from operations will be $270,000. The income tax rate is 45%, and the required after-tax rate of return is 10%. (Click the icon to view the present value factor table.) (Click the icon to view the present value annuity factor table.) Read the requirements. Requirement 1. Compute the NPV, assuming straight-line depreciation of $150,000 yearly for tax purposes. Should Hasting acquire the computers? Explain. Begin by computing the net present value (NPV) of the computer investment. (Enter the present value factor to four decimal places, "X.XXXX." Round dollar amounts the nearest whole number. Use a minus sign or parentheses for a negative net present value.) Present Value of Annual Cash Total Present Ordinary Annuity of $1 at 7 years, 10% Inflow Value Net present value: Present value of annuity of equal annual: After-tax cash flows from operations per year = After-tax cash savings from depreciation per year = Less: Initial investment TU Net present value Data Table Present Value of $1 Period 3% 4% 5% 6% 7% 8% 10% 12% 14% 16% 18% 20% 25% 1 .9709 .9615 .9524 .9434 .9346 .9259 .9091 .8929 .8772 .8621 .8475 .8333 .8000 2 .9426 .9246 .9070 .8900 .8734 .8573 .8264 .7972.7695 .7432 .7182 .6944 .6400 3 .9151 .8890 .8638 .8396 .8163 .7938 .7513 .7118 .6750 .6407 .6086 .5787 .5120 4 .8885 .8548 .8227 .7921 .7629 .7350 .6830.6355 5921 .5523 .5158 4823 4096 5 .8626 .8219 .7835 .7473 .7130 .6806 .6209 .5674 .5194 4761 .4371 .4019 .3277 6 .8375 .7903 .7462 .7050 .6663 .6302 .5645 .5066 .4556 4104 .3704 .3349 .2621 7 .8131 .7599 .7107 .6651 .6227 .5835 .5132 4523 .3996 .3538 .3139 .2791 .2097 8 .7894 .7307 .6768 .6274 .5820 .5403 4665 4039 .3506 .3050 .2660 .2326 .1678 9 .7664 .7026 .6446 .5919 .5439 .5002 .4241 .3606 .3075 .2630 .2255 .1938 .1342 10 .7441 .6756 .6139 .5584 .5083 .4632 .3855 .3220 .2697 2267 . 1911 . 1615 .1074 12 .7014 .6246 .5568 .49704440 .3971 .3186 .2567 2076 . 1685 1372 .1122 .0687 15 .6419 .5553 .4810 .4173 .3624 .3152 .2394 .1827 .1401 1079 .0835 0649 .0352 18 .5874 .4936 4155 .3503 .2959 .2502 .1799 .1300 .0946 .0691 .0508 .0376 .0180 20 .5537 4564 .3769 .3118 2584 .2145 .1486 .1037 .0728 .0514 .0365.0261 .0115 Print Done Done Data Table Present Value of Ordinary Annuity of $1 Period 3% 4% 5% 6% 7% 8% 10% 12% 14% 16% 18% 20% 25% 1 .9709 .9615 .9524 .9434 .9346 .9259 .9091 .8929 .8772 .8621 .8475 .8333 8000 2 1.9135 1.8861 1.8594 1.8334 1.8080 1.7833 1.7355 1.6901 1.6467 1.6052 1.5656 1.5278 1.4400 3 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.4869 2.4018 2.3216 2.2459 2. 1743 2.1065 1.9520 4 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.1699 3.0373 2.9137 2.7982 2.6901 2.5887 2.3616 3.7908 3.6048 3.4331 3.2743 3.1272 2.9906 2.6893 5 4.5797 4.4518 4.3295 4.2124 4.1002 3.9927 6 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.3553 4.1114 3.8887 3.6847 3.4976 3.3255 2.9514 7 6.2303 6.0021 5.7864 5.5824 5.3893 5.2064 4.8684 4.5638 4.2883 4.0386 3.8115 3.6046 3.1611 8 7.0197 6.7327 6.4632 6.2098 5.9713 5.7466 5.3349 4.9676 4.6389 4.3436 4.0776 3.8372 3.3289 9 7.7861 7.4353 7.1078 6.8017 6.5152 6.2469 5.7590 5.3282 4.9464 4.6065 4.3030 4.0310 3.4631 10 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.1446 5.6502 5.2161 4.8332 4.4941 4.1925 3.5705 12 9.9540 9.3851 8.8633 8.3838 7.9427 7.5361 6.8137 6.1944 5.6603 5.1971 4.7932 4.4392 3.7251 15 11.9379 11.1184 10.3797 9.7122 9.1079 8.5595 7.6061 6.8109 6.1422 5.5755 5.0916 4.6755 3.8593 8.2014 7.2497 6.4674 5.8178 5.2732 4.8122 3.9279 18 13.7535 12.6593 11.6896 10.8276 10.0591 9.3719 20 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181 8.5136 7.4694 6.6231 5.9288 5.3527 4.8696 3.9539 Print Done Requirement 2. Suppose the computers will be fully depreciated at the end of year 7 but can be sold for $40,000 cash. Compute the NPV. Should Hasting 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 7 years, 10% Inflow Value NPV of invesment from requirement 1 Present value of lump sum after-tax cash flow II from disposal of computers at the end of year 7 Net present value Net present value: Present value of annuity of equal annual: After-tax cash flows from operations per year = After-tax cash savings from depreciation per year = MU Less: Initial investment Net present value Enter any number in the edit fields and then click Check