Question
Please see screen shot Scott Investors, Inc., is considering the purchase of a $371,000 computer with an economic life of four years. The computer will
Please see screen shot
Scott Investors, Inc., is considering the purchase of a $371,000 computer with an economic life of four years. The computer will be fully depreciated over four years using the straight-line method. The market value of the computer will be $71,000 in four years. The computer will replace 4 office employees whose combined annual salaries are $116,000. The machine will also immediately lower the firms required net working capital by $91,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 40 percent. The appropriate discount rate is 10 percent. |
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