Gemini LLC invested $1 million in a state-of-the-art information system that promises to reduce processing costs for

Question:

Gemini LLC invested $1 million in a state-of-the-art information system that promises to reduce processing costs for its purchasing activities by $120,000 per year. The company will scrap its old information system and will receive no money as a consequence. The new system will be depreciated over 10 years at a rate of $100,000 per year. Gemini’s tax rate is 30 percent, and it has a 7 percent after-tax cost of capital.

Required
What is the after-tax of Gemini’s new information system?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...