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Network Computers is deciding whether to invest in prevention costs for its servers. Data regarding the decision between investing or not is as follows:
Network Computers is deciding whether to invest in prevention costs for its servers. Data regarding the decision between investing or not is as follows: Invest in Prevention Do Not Invest Cost of Equipment $ 175,000 $ 25,000 %24 Working capital investment required Annual Activity Annual Sales (assume all cash) $ 294,000 $175,000 Annual Cash Expenses Repair Costs $ 14,000 $ 21,875 $ 30,000 $ 35,000 Depreciation Maintenance Supplies $ 55,000 Retooling costs of equipment at Year 5 $ 115,000 Salvage value of equipment 2$ 3,500 Life of project 8 8. The working capital will be released for investment elsewhere at the end of the 8 years. Network Computers uses a 8% discount rate. (Ignore income taxes) Show all computations using the net present value format. Prepare separate computations for each project. a) Invest in Prevention b) Do Not Invest %24 %24 %24
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