Question
Tesla is evaluating whether to spend $36,000 to upgrade its computer equipment. Tesla's hurdle rate for all of its investments is 10%. The computer equipment
Tesla is evaluating whether to spend $36,000 to upgrade its computer equipment. Tesla's hurdle rate for all of its investments is 10%.
The computer equipment has no estimated salvage value and has an estimated life of three years.
The incremental annual net income from the computer equipment is $1,400, after deducting $12,000 for depreciation.
The Present Value of an Annuity ( PVA) of $1 for various time periods is as follows:
| Periods | 10% |
|---|---|
| 1 | 0.9091 |
| 2 | 1.7355 |
| 3 | 2.4869 |
| 4 | 3.1699 |
What is Tesla's net present value of this computer equipment investment?
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Accounting Principles
Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso
11th Edition
111856667X, 978-1118566671
