The President of Real Time has asked you to evaluate the proposed acquisition of a new computer. The computer cost's $40,000 and will be depreciated using the following rates provided by the IRS.First year; 33%, second year 45%, third year 15% and fourth year 7%. Purchasing the computer will require additional working capital of $2,000.

• Sales will increase by $20,000. Operating costs would increase by $5,000. Tax rate is 40%. Cost of capital is 14%.
• At the end of three years, the market value (selling price) of the computer is $2,000.

a) Compute initial cash outflow at t = 0

b)Compute operational cash flow for years 1 through 3

c)Compute after tax cash inflow from the sale of the computer at the end of the third year.

d) Compute NPV. Should the computer be purchased?

e) Compute IRR. Should the computer be purchased?