Question
The president of real time inc has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $40,000 and it
The president of real time inc has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $40,000 and it falls into the MACRS 3-year class. Purchase of the computer would require an increase in net operating working capital of $5,000. The computer would increase the firm's before-tax revenues by $20,000 per year but would also increase operating costs by $5,000 per year. The computer is expected to be used for 3 years and then sold for $30,000. The firm's marginal tax rate is 40%, and the project's cost of capital is 14%
Refer to Real Time inc. What is the net investment required at t=0?
A. -$43,000
B. -$50,000
C. -$45,000
D. -$42,000
E. -$41,000
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