The law firm of abc is considering investing in complete small business computer system. The initial investment

Question:

The law firm of abc is considering investing in complete small business computer system. The initial investment will be $35,000, the computer is in the 5-year straight-line category, and the firm's tax rate is 34%. The computer system is expected to provide additional revenue of $15,000 per year for the next six years and to reduce expenses by $10,000 per year for the same period.

(a) Calculate the net after-tax cash flows from this investment.

(b) Calculate the net present value of the system that the law firm's weighted average cost of capital is 12%.

Net Present Value
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