Question
Maxgo Company is considering replacing its current computer system. The new system would cost Maxgo $60,000 to have installed and operational. It would have an
Maxgo Company is considering replacing its current computer system. The new system would cost Maxgo $60,000 to have installed and operational. It would have an expected useful life of four years and an estimated salvage value of $12,000 to purchase and to install. 4 year life expectancy and will be depreciated to 0 with the straight line deprecition method. It requires initial investment of $1500 of net working capital. Taking into consideration that no more net working capital will be needed during the project. It has a salvage value of $1200 at year end of 4. Tax rate is 12% and required return is 10%. Find the IRR and wether or not the Maxgo Comapny should replace the current computer system?
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