ABC Corporation is considering the purchase of new accounting software for $50,000. The company expects that the
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ABC Corporation is considering the purchase of new accounting software for $50,000. The company expects that the new software will provide cost savings of $10,000 per year for the next six years. The software has a useful life of six years and an estimated salvage value of $5,000 at the end of its useful life. ABC Corporation uses straight-line depreciation for all of its assets. The company's cost of capital is 10%.
a) What is the net present value (NPV) of the investment in the new software?
b) Should ABC Corporation make the investment?
Related Book For
Accounting Texts and Cases
ISBN: 978-1259097126
13th edition
Authors: Robert Anthony, David Hawkins, Kenneth Merchant
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