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John's Software firm is considering the purchase of computer that has an economic life of 4 years and it is expected to have no salvage
John's Software firm is considering the purchase of computer that has an economic life of 4 years and it is expected to have no salvage value. It will cost $100,000 and it will be depreciated using the straight line depreciation method. It will save the company $40,000 the first year and it is assumed that the savings after that will have a growth rate of -5%. It will reduce net working capital requirements by $10,000. The corporate tax rate is 40% and the appropriate discount rate is 14%. What is the value that the purchase will add to the firm? R PVFVP.MT io 14.00% 14.00% 14.00% 14.00% 14.00% Result 0.5921 0.6750 0.7695 0.8772 2.9137
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