Corporate Leaders Plc is considering the purchase of an asset to increase its production capacity. The company believes this investment would result in cost saving and sales revenue enhancement. Corporate Leaders invites your expertise as Investment Manager to perform Investment Appraisal based on time adjusted method. The relevant data for investment analysis is given below;

Cost of the equipment $350,000

Expected annual cash savings (before tax) to be provided

by the equipment $150,000

Useful life of the equipment 4 years

Expected residual value (salvage value) $70,000

Corporate Tax rate 30%

Discount rate 12%

The equipment is to depreciate using straight line method.

Required: Determine Net Present Value of the investment and suggest whether to undertake this

Investment project?