Lowell Inc is thinking about replacing an old computer with a new one The new one will cost $1,000,000 and will have a life of FOUR years The new computer qualifies as 5 year MACRS property Years 1 2 3 4 Depreciation rate 20 32 19 12 It will probably be worth about $300,000 after FOUR years The old computer is being depreciated at a rate of $100,000 per year It will be completely written off in FOUR years, at that time it will have zero resale value We can sell it now for $300,000 after taxes The new machine will save us $200,000 per year in operating costs The tax rate (federal plus state) is 25 percent and WACC is 8 percent What is the NPV 85,278 161,793 123,536 172,809

Question

Lowell Inc  is thinking about replacing an old computer with a new one  The new one will cost $1,000,000 and will have a life of FOUR years  The new computer qualifies as 5 year MACRS property  Years 1 2 3 4 Depreciation rate 20  32  19  12  It will probably be worth about $300,000 after FOUR years  The old computer is being depreciated at a rate of $100,000 per year  It will be completely written off in FOUR years, at that time it will have zero resale value  We can sell it now for $300,000 after taxes  The new machine will save us $200,000 per year in operating costs  The tax rate (federal plus state) is 25 percent and WACC is 8 percent  What is the NPV  85,278 161,793 123,536 172,809

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Years	1	2	3	4
Depreciation rate	20%	32%	19%	12%

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Lowell Inc. is thinking about replacing an old computer with a new one. The new one will cost $1,000,000 and will have a life of

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