Question
The management of Niagra National Bank is considering an investment in automatic teller machines. The machines would cost $149,500 and have a useful life of
The management of Niagra National Bank is considering an investment in automatic teller machines. The machines would cost $149,500 and have a useful life of seven years. The banks controller has estimated that the automatic teller machines will save the bank $32,500 after taxes during each year of their life (including the depreciation tax shield). The machines will have no salvage value.
1. Compute the net present value of the proposed investment assuming an after-tax hurdle rate of: (a) 10 percent, (b) 12 percent, and (c) 14 percent. (Negative amounts should be indicated by a minus sign.)
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