Question
please show your handwritten work: 3) A new computer system will cost a company $250,000 today. It will help reduce expenses by $50,000 per year
please show your handwritten work:
3) A new computer system will cost a company $250,000 today. It will help reduce expenses by $50,000 per year for each of the next 4 years. The computer will be depreciated using the MACRS 3 year life class. The tax rate is 29%. If the interest rate is 10%, what is the NPV of the proposed computer?
4) A warehouse is currently sitting empty, but can be rented out to a third party for $100,000 a year. A project is proposed in the warehouse by your company which will require an investment of $200,000 and will be depreciated using MACRS over a 5 year life. At the end of the project in THREE YEARS, the machinery will be sold for $50,000. Products sold will be 20,000 units per year at $30 each. Variable costs will be 35% of sales. Fixed costs (not counting the warehouse) will be $20,000 per year. Working capital will be $50,000. The tax rate is 30%. If the interest rate is 10%, what is the NPV of this project?
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