MEEF is going to replace all $30$ of its old computers with new ones. The old computers are fully depreciated

and have no disposal value. The new computers cost $299,880($in total$).$ Because the new computers are

more efficient than the old computers, MEEF will have annual incremental cash savings from using the

new computers in the amount of $64,000$ per year. The computers have a $7-$year useful life and no

terminal disposal value and are depreciated using the straight$-$line method. MEEF requires an $8\%$ real rate

of return.

Required:

Considering the information provided earlier, what is the net present value of the project? Ignore

taxes.

Assume the $64,000$ cost savings are in current real $$ and the inflation rate is $5\mathrm{.}5\%.$ Recalculate the

NPV of the project.

Taking into account your answers to questions $1$ and $2,$ should MEEF purchase the new computers?

Now assume that the company's tax rate is $30\%.$ Calculate the NPV of the project assuming no

inflation.

Again assuming that the company faces a $30\%$ tax rate, calculate the NPV of the project under an

inflation rate of $5\mathrm{.}5\%.$

Based on your answers to requirements $4$ and $5,$ should MEEF buy the new computers?