Question
Market TopInvestors, Inc., is considering the purchase of a $335,000 computer with an economic life of four years. The computer will be fully depreciated over
Market TopInvestors, Inc., is considering the purchase of a $335,000 computer with an economic life of four years. The computer will be fully depreciated over four years using the straight-line method, at which time it will be worth $90,000. The computer will replace two office employees whose combined annual salaries are $91,000. The machine will also immediately lower the firm's required net working capital by $80,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 25 percent. The appropriate discount rate is 9 percent.
What is the NPV?
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