The law firm of XYZ Inc. is considering investing in a complete small business computer system....
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The law firm of XYZ Inc. is considering investing in a complete small business computer system. The initial investment will be $35,000 for the hardware, which will be used for 10 years with a salvage value of $5,000, and software of $20,000. During the 10 years that the system is in use, an additional $5,000 per year will be spent for additional software. Software has a CCA rate of 45%. The computer system is expected to provide additional revenue of $15,000 per year for the next 10 years. The firm's cost of capital is 12 percent and its tax rate is 40 percent. Using net present value analysis, should this investment be accepted? The law firm of XYZ Inc. is considering investing in a complete small business computer system. The initial investment will be $35,000 for the hardware, which will be used for 10 years with a salvage value of $5,000, and software of $20,000. During the 10 years that the system is in use, an additional $5,000 per year will be spent for additional software. Software has a CCA rate of 45%. The computer system is expected to provide additional revenue of $15,000 per year for the next 10 years. The firm's cost of capital is 12 percent and its tax rate is 40 percent. Using net present value analysis, should this investment be accepted?
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