eEgg is considering the purchase of a new distributed network computer system to help handle its warehouse inventories. The system costs $40,000 to purchase and install and $23,000 to operate each year. The system is estimated to be useful for 4 years. Management expects the new system to reduce the cost of managing inventories by $44,000 per year. The firm's cost of capital (discount rate) is 12%. Required: 1. What is the net present value (NPV) of the proposed investment under each of the following independent situations? (Use the appropriate present value factors from Appendix C. TABLE 1 and Appendix C. TABLE 2.) 1a. The firm is not yet profitable and therefore pays no income taxes. 1b. The firm is in the 25% income tax bracket and uses straight-line (SLN) depreciation with no salvage value. Assume MACRS rules do not apply. 1c. The firm is in the 25% income tax bracket and uses double-declining-balance (DDB) depreciation with no salvage value. Given a four-year life, the DDB depreciation rate is 50% (i.e., 2 x 25%). In year four, record depreciation expense as the net book value (NBV) of the asset at the start of the year. 2. What is the internal rate of return (IRR) of the proposed investment for situations in requirement 1, parts (a) through (c)? Use the IRR builit-in function in Excel to compute the IRR. TABLE 2 Present Value of Annuity of $1 4% 6% 8% 11% 12% 13% 15% 20% Periods 1 9% 0.917 30% 0.769 0.962 7% 0.935 1.808 0.901 0.893 0.885 5% 0.952 1.859 2.723 0.833 0.943 1.833 2 1.759 1.713 1.528 1.886 2.775 3.630 1.668 2.361 3 0.926 1.783 2.577 3.312 3.993 1.361 1.816 2.673 2.624 2.531 3.240 2.444 3.102 14% 0.877 1.647 2.322 2.914 3.433 3.889 1.690 2.402 3.037 3.605 4 3.546 3.465 3.387 2.166 2.974 3.517 2.106 2.589 2.991 3.326 4.452 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 4.329 4.212 4.100 3.890 3.696 2.436 6 5.242 4.917 4.767 4.486 4.111 3.998 2.643 5.076 5.786 4.623 5.206 4.231 4.712 7 6.002 5.582 5.389 5.033 4.564 4.423 4.288 3.605 2.802 8 6.733 6.210 5.971 5.747 5.535 5.146 4.968 4.639 3.837 6.463 7.108 4.799 5.132 25% 0.800 1.440 1.952 2.362 2.689 2.951 3.161 3.329 3.463 3.571 3.656 3.725 3.780 3.824 3.859 3.887 3.910 2.925 3.019 9 7.435 6.515 6.247 5.995 5.537 4.946 4.031 6.802 7.360 10 8.111 7.024 5.889 4.192 7.722 8.306 6.418 6.805 5.328 5.650 5.938 6.194 11 7.887 7.499 6.495 6.207 4.327 6.710 7.139 7.536 7.904 8.760 9.385 5.426 5.687 5.918 6.122 5.216 5.453 5.660 5.842 3.092 3.147 3.190 3.223 12 8.863 8.384 7.943 6.492 0.870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 5.234 5.421 5.583 5.724 5.847 5.954 6.047 6.128 6.198 6.259 6.359 6.434 6.464 6.566 7.161 7.487 4.439 4.533 13 8.853 8.358 6.750 6.424 9.986 10.563 9.394 9.899 14 9.295 8.244 7.786 6.628 6.302 6.002 8.745 9.108 6.982 7.191 4.611 4.675 15 10.380 9.712 8.061 6.811 6.462 6.142 16 9.447 8.313 7.379 7.549 6.974 7.120 4.730 4.775 17 10.838 11.274 11.690 12.085 9.763 10.059 18 19 3.928 11.118 11.652 12.166 12.659 13.134 13.590 14.451 15.247 15.622 17.292 10.336 6.814 7.103 7.367 7.606 7.824 8.022 8.201 8.365 8.514 8.772 8.985 9.077 9.427 8.544 8.756 8.950 9.129 3.942 8.559 8.851 9.122 9.372 9.604 9.818 10.201 10.529 10.675 11.258 10.106 10.477 10.828 11.158 11.470 12.042 12.550 12.783 13.765 6.265 6.373 6.467 6.550 6.623 - ---[L. L| 4.812 4.843 4.870 20 3.249 3.268 3.283 3.295 3.304 3.311 3.316 3.323 3.327 3.329 3.332 6.604 6.729 6.840 6.938 7.025 7.170 7.283 7.330 7.496 12.462 13.163 13.799 14.094 15.372 7.702 7.839 7.963 8.176 8.348 8.422 8.694 22 24 6.743 7.250 7.366 7.469 7.645 7.784 7.843 8.055 10.594 11.061 11.469 11.654 12.409 4.909 TT 9.442 9.707 9.823 10.274 4.937 ||.T. ,, 3.954 3.970 3.981 3.985 3.995 6.835 6.873 7.003 25 H 4.948 4.979 30 TABLE 1 Present Value of $1 4% 10% 13% 20% 1 8% 0.926 30% 0.769 Periods 1 2 3 I. 0.962 0.925 0.889 0.857 0.909 0.826 0.751 11% 0.901 0.812 0.731 0.659 0.794 25% 0.800 0.640 0.512 0.410 0.328 0.262 0.210 4 0.855 0.683 5 0.822 0.790 0.760 0.621 0.564 6 Tall 0.513 6% 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0.527 0.497 0.469 0.442 0.417 7 8 9 0.467 0.168 7% 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.415 0.388 0.362 0.339 0.317 0.296 0.592 0.455 0.350 0.269 0.207 0.159 0.123 0.094 0.073 0.056 0.424 5% 0.952 0.907 0.864 0.823 0.784 0.746 0.711 0.677 0.645 0.614 0.585 0.557 0.530 0.505 0.481 0.458 0.436 0.416 0.396 0.377 0.342 0.310 0.295 0.231 J. 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.555 0.534 0.513 10 0.386 0.350 9% 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 0.252 0.231 0.212 0.194 0.178 0.150 0.126 0.116 0.075 14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 0.237 0.208 0.182 0.160 0.140 0.123 0.108 0.095 0.083 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 0.215 0.187 0.163 0.141 0.123 0.107 0.093 0.593 0.535 0.482 0.434 0.391 0.352 0.317 0.286 0.258 0.232 0.209 0.188 0.170 11 12 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.135 0.112 0.093 0.078 0.065 0.054 0.045 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.287 0.257 0.229 0.205 0.183 0.163 0.146 0.130 0.116 0.104 0.083 0.066 0.059 0.033 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.315 0.292 0.270 0.250 0.232 0.215 0.184 0.158 0.146 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 0.295 0.261 0.231 0.204 0.181 0.160 0.141 0.125 0.111 0.098 0.087 0.068 0.053 0.047 0.319 0.290 0.043 13 0.134 0.107 0.086 0.069 0.055 0.044 0.035 0.028 0.023 14 0.263 15 0.239 16 0.394 0.033 0.025 0.020 0.015 0.012 0.009 0.007 0.218 0.198 0.180 17 18 0.494 0.153 0.081 0.038 0.371 0.350 0.331 0.312 0.278 0.018 0.014 19 0.277 0.164 0.138 0.070 0.031 1 blo 20 0.258 0.149 0.124 0.061 0.005 0.073 0.056 0.026 0.018 0.012 0.007 22 0.226 0.123 0.046 0.475 0.456 0.422 0.390 0.375 0.308 0.003 ololololo 24 0.247 0.197 0.043 0.035 0.005 0.002 0.101 0.082 0.074 0.044 25 UL 0.233 0.102 0.092 0.057 0.013 0.010 0.184 0.038 I. 0.030 0.004 0.001 0.000 30 0.174 0.131 0.099 0.026 0.020 0.015 0.004 0.001