Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Data Tank, Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $60,000, and it falls into

The Data Tank, Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $60,000, and it falls into the 4-year straight-line depreciation to $4,000. The purchase of the computer would require an increase in net operating working capital of $3,500. The computer would increase the firm's before-tax revenues by $60,000 per year but would also increase operating costs by $8,000 per year. The computer is expected to be used for 3 years and then be sold for $25,000 at the end of Year 3. The company will recover all capital at the end of the operation cycle. The firm's marginal tax rate is 40 percent, and the project's cost of capital is 11 percent. The MACRS table - 33.33%, 44.45%, 14.81%, and 7.41% for Years 1 through 4.

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

Recommended Textbook for

Finance

Authors: Angelico Groppelli, Ehsan Nikbakht

7th Edition

1438010362, 9781438010366

More Books

Students also viewed these Finance questions

Question

25.0 m C B A 52.0 m 65.0 m

Answered: 1 week ago