Question
Warehouses is consider a new network computer system to handle warehouse inventories. The systems costs $60,000 to purchase and install. It costs $30,000 / year
Warehouses is consider a new network computer system to handle warehouse inventories. The systems costs $60,000 to purchase and install. It costs $30,000 / year to operate. The system has a 4 year life. There is zero salvage value. The system is expects to saye inventory management costs by $62,000/year. The firms cost of capital is 10%.
What is the Net Present Value if:
a. The firm is not yet profitable and therefore pays no income taxes. NPV $ ____________________
b. The firm is in the 30% income tax bracket and uses straight-line depreciation with no salvage. We will use
straight line for tax purposes, not MACRS. NPV $ ________________________________
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