Question
Scott Investors, Inc., is considering the purchase of a $360,000 computer with an economic life of five years. The computer will be fully depreciated over
Scott Investors, Inc., is considering the purchase of a $360,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method. The market value of the computer will be $60,000 in five years. The computer will replace five office employees whose combined annual salaries are $105,000. The machine will also immediately lower the firms required net working capital by $80,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 34 percent. The appropriate discount rate is 12 percent. |
Calculate the NPV of this project. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
NPV | $ |
Is it worthwhile to buy the computer? | ||||
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