Question: Your company is considering a new computer system that will initially cost $1 million. It will save $300,000 a year in management costs. The system

Your company is considering a new computer system that will initially cost $1 million. It will save $300,000 a year in management costs.
The system is expected to last for five years and will be depreciated using 4-year straight-line.
Our accountant determines that the book value of the equipment will be zero at the end of year 4.
However, our financial analyst expects that we can sell the machine for $50,000 at the end of year 5.
There is no impact on net working capital. The marginal tax rate is 40%. Cost of capital is 8%.
Should your company purchase this new computer system?

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