IBC, Inc. is considering the purchase of a $300,000 computer that has an economic life of 5 years. The computer will be depreciated according to 5-year MACRS schedule (20%, 32%, 19.2%, 11.52%, 11.52%, and 5.76%). The market value of the computer will be $50,000 in 5 years. The use of computer will save annual costs of $100,000 for the next five years. For simplicity, these cost savings are assumed to occur at the end of these years. As a result of this project, the net working capital will increase by $40,000 immediately, and it will be recovered at the end of year 5. The firms tax rate is 40% and its cost of capital is 12%.

QUESTION 54

1. What is the operating cash flow four years from today (t=4)?

$73,824

$74,250

$83,040

$84,000

$98,400

1 points

QUESTION 55

1. How much tax is the firm expected to pay when the asset is sold for $50,000 in year 5?

$8,543

$9,671

$10,127

$13,088

$15,233

1 points

QUESTION 56

1. What is the total cash flow five year from today (t=5)?

$97,431

$100,313

$112,452

$139,824

$150,736

1 points

QUESTION 57

1. What is the project's NPV?

$4,998

$10,616

$15,231

$21,267

$22,347