Market Top Investors, Inc. is considering purchasing a computer worth $340,000 with a five-year lifespan. The computer
Question:
Market Top Investors, Inc. is considering purchasing a computer worth $340,000 with a five-year lifespan. The computer will be fully depreciated over five years using the straight-line method and would be worth $36,000 at that date. The computer will replace two office workers with total annual salary of $82,000. The machine will also immediately reduce the firm's required net working capital by $71,000. This net working capital amount will need to be changed after the machine is sold. The corporate tax rate is 21 percent. The appropriate discount rate is 8 percent.
Calculate the NPV of this project. (Do not round up intermediate calculations and round your answer to 2 decimal places, eg 32.16.)
Does it make sense to buy a computer?
Corporate Finance
ISBN: 9781260772388
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe