Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Tech Investors, Inc., is considering the purchase of a $345,000 computer with an economic life of five years. - The computer will be fully depreciated

image text in transcribed
Tech Investors, Inc., is considering the purchase of a $345,000 computer with an economic life of five years. - The computer will be fully depreciated over five years using the straight-line method, at which time it will be worth $78,000. - The computer will replace two office employees whose combined annual salaries are \$89,000. - The machine will also immediately lower the firm's required net working capital by $78,000. - This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 23 percent. - The appropriate discount rate is 11 percent. Calculate the NPV of this project. Is it worthwhile to buy the computer? NPV=$34,287, Yes NPV=$34,287, No NPV=$37,236, Yes NPV=$37,236, No

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions