The president of Amazing Games, an online gaming company, is considering the purchase of some equipment used for the development of new games. The cost is $300,000, the economic life and the recovery period are both 3 years, and there is no terminal disposal value. Annual pretax cash inflows from operations would increase by $160,000, giving a total 3-year pretax savings of $480,000. The income tax rate is 45%, and the required after-tax rate of return is 12%. (Click the icon to view the present value factor table.) (Click the icon to view the present value annuity factor table.) Read the requirements. Requirement 1. Compute the NPV, assuming straight-line depreciation of $100,000 yearly for tax purposes. Should Amazing Games acquire the equipment? Begin by computing the net present value (NPV) of the equipment investment. (Round dollar amounts the nearest whole number. Use a minus sign or parentheses for a negative net present value. Enter the present value factor to four decimal places, "X.XXXX.") Present Value of Ordinary Annuity of $1 Annual Cash Total Present at 3 years, 12% Inflow Value Net present value: Present value of annuity of equal annual After-tax cash flows from operations per year After-tax cash savings from depreciation per year Less: Initial investment Net present value Requirements 1. Compute the NPV, assuming straight-line depreciation of $100,000 yearly for tax purposes. Should Amazing Games acquire the equipment? 2. Suppose the asset will be fully depreciated at the end of year 3 but can be sold for $60,000 cash. Should Amazing Games acquire the equipment? Show computations. 3. Ignore number 2. Suppose the required after-tax rate of return is 10% instead of 12%. Should Amazing Games acquire the equipment? Show computations. i Data Table - X Present Value of $1 Period 3% 4% 5% 6% 7% 8% 10% 12% 14% 16% 18% 20% 25% 1 .9709 .9615 .9524 9434 .9346 .9259 9091 .8929 .8772.8621 .8475 .8333 .8000 2 .9426 9246 .9070 .8900 .8734 .8573 .8264 7972 .7695 7432 .7182 .6944 .6400 3 9151 .8890 .8638 .8396 .8163 .7938 .7513 7118 .6750.6407 .6086 .5787 .5120 4 .8885 .8548 .8227 .7921 .7629 .7350 .6830 .6355 5921 .5523 .5158 4823 4096 5 8626 .8219 .7835 .7473 .7130 .6806 6209 .5674 5194 4761 4371 4019 3277 6 .8375 .7903 .7462 .7050 .6663 .6302 5645 .5066 .4556 4104 .3704 .3349 2621 7 .8131 .7599 .7107 .6651 .6227 .5835 .5132 .4523 .3996 3538 .3139 2791 2097 7894 7307 8 9 .6768 .6274 .5820 .5403 .4665 4039 .3506 3050 2660 .2326 .1678 .7664 .7026 .6446 5919 5439 5002 4241 .3606 .2255 .1938 .1342 10 .7441 .6756 .6139 .5584 5083 4632 3220 .3075 2630 .2697 2267 2076 1685 .1911 3855 3186 .1615 .1074 12 7014 .6246 .5568 .4970 4440 3971 2567 .1372 .1122 .0687 15 6419 .5553 .4810 .4173 3624 .3152 2394 .1827 1401 1079 .0835 .0649 .0352 18 .5874 .4936 .4155 .3503 .2959 2502 1799 1300 .0946 .0691 .0508 .0376 .0180 20 .5537 .4564 3769 3118 2584 2145 . 1486 .1037 0365 0261 .0115 25 .4776 .3751 2953 .0728 .0514 .0378 .0245 .2330 .1842 .1460 .0923 .0588 .0160 .0105 .0038 28 .4371 .3335 2551 .1956 .1504 .1159 .0693 0419 .0255 .0157 .0097 .0061 .0019 30 .4120 .3083 2314 .1741 .1314 .0994 .0573 .0334 .0196 .0116 .0070 0042 .0012 7% 8 Present Value of Ordinary Annuity of $1 Period 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% 25% 1 .9709 .9615 .9524 .9434 .9346 .9259 .9091 .8929 .8772 .8621 8475 .8333 .8000 2 1.9135 1.8861 1.8594 1.8334 1.8080 1.7833 1.7355 1.6901 1.6467 1.6052 1.5656 1.5278 1.4400 3 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.4869 2.4018 2.3216 2.2459 2.1743 2.1065 1.9520 4 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.1699 3.0373 2.9137 2.7982 2.6901 2.5887 2.3616 5 4.5797 4.4518 4.3295 4.2124 4.1002 3.9927 3.7908 3.6048 3.4331 3.2743 3.1272 2.9906 2.6893 6 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.3553 4.1114 3.8887 3.6847 3.4976 3.3255 2.9514 7 6.2303 6.0021 5.7864 5.5824 5.3893 5.2064 4.8684 4.5638 4.2883 4.0386 3.8115 3.6046 3.1611 7.0197 6.7327 6.4632 6.2098 5.9713 5.7466 5.3349 4.9676 4.6389 4.3436 4.0776 3.8372 3.3289 9 7.7861 7.4353 7.1078 6.8017 6.5152 6.2469 5.7590 5.32824.9464 4.6065 4.3030 4.0310 3.4631 10 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.1446 5.6502 5.2161 4.8332 4.4941 4.1925 3.5705 12 9.9540 9.3851 8.8633 8.3838 7.9427 7.5361 6.8137 6.1944 5.6603 5.1971 4.7932 4.4392 3.7251 15 11.9379 11.1184 10.3797 9.7122 9.1079 8.55957.6061 6.8109 6.1422 5.5755 5.0916 4.6755 3.8593 18 13.7535 12.6593 11.6896 10.8276 10.0591 9.37198.2014 7.2497 6.4674 5.8178 5.2732 4.8122 3.9279 20 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181 8.5136 7.4694 6.6231 5.9288 5.3527 4.8696 3.9539 25 17.4131 15.6221 14.0939 12.7834 11.6536 10.6748 9.0770 7.8431 6.8729 6.0971 5.4669 4.9476 3.9849 28 18.7641 16.6631 14.8981 13.4062 12.1371 11.0511 9.3066 7.9844 6.9607 6.1520 5.5016 4.9697 3.9923 30 19.6004 17.2920 15.3725 13.7648 12.4090 11.2578 9.4269 8.0552 7.0027 6.1772 5.5168 4.9789 3.9950