The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer’s price is $40,000, and it falls in the MACRS 3-year class with the applicable depreciation rates of 33%, 45%, 15%, and 7%. 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 three years and then sold for $25,000. The firm’s marginal tax rate is 40%, and the project’s cost of capital is 14%. What is the net investment required at t = 0?

Group of answer choices

-$37,600

-$38,600

-$42,000

-$40,000

-$36,600

Answer rating: 100% (QA)

The Net Investment is the amount of initial investment required net of any gains receivable because ... View the full answer