Graphitia Design Company considers purchasing a computer system. The initial capital cost of the computer system...

 

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Graphitia Design Company considers purchasing a computer system. The initial capital cost of the computer system is $3.6M. It can be used for 5 years, and that it will be sold for $23,000 at the end of year 5. It is estimated that a total of 4 officers' salary can be saved annually. The yearly staff cost of an officer is $330K. The system maintenance cost is fixed at $400K per year. (a) Prepare a table for the cash flow of the purchase. (8%) (b) Calculate the NPV of the purchase based on the cost of capital at 6%. (8%) (c) Is this a good investment for Graphitia? Explain. 4 (4%) Graphitia Design Company considers purchasing a computer system. The initial capital cost of the computer system is $3.6M. It can be used for 5 years, and that it will be sold for $23,000 at the end of year 5. It is estimated that a total of 4 officers' salary can be saved annually. The yearly staff cost of an officer is $330K. The system maintenance cost is fixed at $400K per year. (a) Prepare a table for the cash flow of the purchase. (8%) (b) Calculate the NPV of the purchase based on the cost of capital at 6%. (8%) (c) Is this a good investment for Graphitia? Explain. 4 (4%)

Answer rating: 100% (QA)

Answer I Net present value Present value of benefits Present value of costs A Years 0 1 2 3 4 5 Infl... View the full answer