Question: The Data Tank, Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $40,000, and it falls
The Data Tank, Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $40,000, and it falls into the MACRS 3-year class. Purchase of the computer would require an increase in net operating working capital of $2,000. The computer would increase the firm's before-tax revenues by $20,000 per year but would also increase operating costs by $5,000 per year. The computer is expected to be used for 3 years and then be sold for $25,000. The firm's marginal tax rate is 40 percent, and the project's cost of capital is 14 percent. The MACRS table - 33.33%, 44.45%, 14.81%, and 7.41% for Years 1 through 4. What is the project's NPV? $2,803 $2,917 $6,438 $2,622 $5,712
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