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Scott Investors is considering the purchase of a $500,000 computer that has an economic life of 5 years.The computer will be depreciated using the 5-year
Scott Investors is considering the purchase of a $500,000 computer that has an economic life of 5 years.The computer will be depreciated using the 5-year MACRS schedule.The market value of the machine will be $100,000 in 5 years.The use of the computer will eliminate the jobs of 5 office employees whose annual salaries combined are $120,000.It also contributes to a reduction of net operating working capital by $100,000 when they buy the equipment.The corporate tax rate is 34%.Is it worthwhile to buy the equipment if the WACC is 12%?
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