Question: The management of Kimco is evaluating replacing their large mainframe computer with a modern network system that requires much less office space. The network would

The management of Kimco is evaluating replacing their large mainframe computer with a modern network system that requires much less office space. The network would cost $500,000 (including installation costs) and, due to efficiency gains, would generate $125,000 per year in operating cash flows (accounting for taxes and depreciation) over the next five years due to efficiency gains. The mainframe has a remaining book value of $50,000 and would be immediately donated to a charity for the tax benefit. Kimco’s cost of capital is 10 percent and tax rate is 40 %. On the basis of NPV, should management install the network system?

Step by Step Solution

★★★★★

3.36 Rating (165 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Year 0 1 2 3 4 5 Network cost 500000 Operating cash flows 125000 1... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

428-B-C-F-C-B (2041).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

Georgia Beemster, CPA, is examining the financial statements of the Louisville Sales Corporation, which recently installed a computerized processing system. The following comments have been extracted...

Accounting Should the Australian Capital Gains Tax system have a 50% discount available to taxpayers? Discuss this with reference to the criteria for evaluating tax policy: Economic efficiency ...

The Lovett Corporation uses an IBM mainframe computer system with peripheral optical reader and high-speed laser printer equipment. Transaction information is initially recorded on paper documents...

The tax system has a 50% tax rate on gains from risky investments, and also allows a deduction at a 50% rate of any losses from risky investments. Which tax policy would increase risk taking more:...

The management of Kimco is evaluating replacing their large mainframe computer with a modern network system that requires much less office space. The network would cost $487.672,00 (including...

#16 The management of Kimco is evaluating replacing their large mainframe computer with a modern network system that requires much less office space. The network would cost $485,480.00 (including...

1) Roy Hobbs Bats begin producing a special bat for the 2014 season. The bat will require investment in new equipment priced at $300,000.00. The equipment will be straight-line depreciated to zero...

The management of Kimco is evaluating replacing their large mainframe computer with a modern network system that requires much less office space. The network would cost $500,000 (including...

The management of Kimco is evaluating replacing their large mainframe computer with a modern network system that requires much less office space. The network would cost $498,152.00 (including...

#17 The management of Kimco is evaluating replacing their large mainframe computer with a modern network system that requires much less office space. The network would cost $513,984.00 (including...

#8 O The management of Kimco is evaluating replacing their large mainframe computer with a modern network system that requires much less office space. The network would cost $492,345.00 (including...

Use a computer to graph ph z and |z| . Discuss what you observe.

Create a presentation of an ideal performance management system (pms) that you would implement as the human resources (hr) manager of an organization (fictional or real). be sure to include...

Jonah grew up in a neighborhood with poor schools, few businesses, and many run - down and abandoned buildings. However, in the past few years, the city has renovated many buildings, and tax breaks...

Gerald's department store is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Sales ....................................................

What pressure is required to achieve a CO2 concentration of 0.0480 mol L1 at 20 C? Express your answer to three significant figures and include the appropriate units. View Available Hint(s) HA Value...

Cyclohexane has a freezing point of 6.50 C and a Kf of 20.0 C/m. What is the freezing point of a solution made by dissolving 0.540 g of biphenyl (C12H10) in 25.0 g of cyclohexane? Express the...

Part A What is the osmotic pressure of a solution made from dissolving 95.0 g of glucose, C H12O6, in 275 mL of water at 31.0 C ? View Available Hint(s) V AZ atm Submit

7-8. (Bond valuation) ExxonMobil 20-year bonds pay 9 percent interest annually on a $1,000 par value. If bonds sell at $945; what is the bonds expected rate of return?

Zerox Copying Company plans to borrow $172,000. New Jersey National Bank will lend the money at one-half percentage point over the prime rate at the time of 17 percent (18 percent total) and requires...

Lewis and Clark Camping Supplies Inc. is borrowing $51,000 from Western State Bank. The total interest is $15,700. The loan will be paid by making equal monthly payments for the next three years....

Mr. Hugh Warner is a very cautious businessman. His supplier offers trade credit terms of 3/15, net 85. Mr. Warner never takes the discount offered, but he pays his suppliers in 75 days rather than...

JETA Company tiene un tiempo de ciclo de 3 das, utiliza una cuenta sin procesar y en proceso (RIP) y carga todos los costos de conversin al costo de los bienes vendidos. Al final de cada mes, se...

Assume that your parents wanted to have $180,000 saved for college by your 18th birthday and they started saving on your first birthday. They saved the same amount each year on your birthday and...

As evidenced by Table 4 from Agarwal and Naik (2004, Risks and portfolio decisions involving hedge funds, Review of Financial Studies ) provided above: Explain the implications of hedge funds'...