NewSyd Ltd is considering purchasing a new piece of equipment for K50,000. The equipment will reduce costs by K5,000 per year and boost revenues by K22,000 per year. The equipment has an estimated useful life of 4 years, when its salvage value will be zero. For tax purposes, the equipment will be depreciated on a straight-line basis over its four-year useful life. The corporate tax rate is 30% and the after-tax required return on investments of similar risk is 10%. 

Assuming all cash flows occur at the end of the year, should NewSyd Ltd investment in the new equipment?

Answer rating: 100% (QA)

To determine whether NewSyd Ltd should invest in the new equipment we need to calculate the Net Pres... View the full answer