Crenshaw, Incorporated, is considering the purchase of a $364,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method. The market value of the computer will be $64,000 in five years. The computer will replace five office employees whose combined annual salaries are $109,000. The machine will also immediately lower the firm's required net working capital by $84,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 24 percent. The appropriate discount rate is 12 percent. Calculate the NPV of this project. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. NPV $ 280,636.80

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
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Vijay 

Crenshaw, Incorporated, is considering the purchase of a $364,000 computer with an economic life of five years. The computer will be
fully depreciated over five years using the straight-line method. The market value of the computer will be $64,000 in five years. The
computer will replace five office employees whose combined annual salaries are $109,000. The machine will also immediately lower
the firm's required net working capital by $84,000. This amount of net working capital will need to be replaced once the machine is
sold. The corporate tax rate is 24 percent. The appropriate discount rate is 12 percent. Calculate the NPV of this project.
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
NPV
$
280,636.80
Transcribed Image Text:Crenshaw, Incorporated, is considering the purchase of a $364,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method. The market value of the computer will be $64,000 in five years. The computer will replace five office employees whose combined annual salaries are $109,000. The machine will also immediately lower the firm's required net working capital by $84,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 24 percent. The appropriate discount rate is 12 percent. Calculate the NPV of this project. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. NPV $ 280,636.80
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