A manager of the engineering department of Manchester University is contemplating acquiring 120 computers The computers will cost 240,000 cash, have zero terminal salvage value , and a useful life of 3 years Annual cash savings from operations will be 110,000 The required rate of return is 14 There...

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A manager of the engineering department of Manchester University is contemplating acquiring 120 computers. The computers will

Question:

A manager of the engineering department of Manchester University is contemplating acquiring 120 computers. The computers will cost £240,000 cash, have zero terminal , and a useful life of 3 years. Annual cash savings from operations will be £110,000. The required rate of return is 14%. There are no taxes.
1. Compute the NPV.
2. Should the engineering department acquire the computers? Explain.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...