Market Top Investors, Incorporated, is considering the purchase of a $345,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method, at which time it will be worth $78,000. The computer will replace two office employees whose combined annual salaries are $89,000. The machine will also immediately lower the firm’s required net working capital by $78,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 23 percent. The appropriate discount rate is 11 percent. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Market Top Investors, Incorporated, is considering the purchase of a $345,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method, at which time it will be worth $78,000. The computer will replace two office employees whose combined annual salaries are $89,000. The machine will also immediately lower the firm’s required net working capital by $78,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 23 percent. The appropriate discount rate is 11 percent. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 12P
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Market Top Investors, Incorporated, is considering the purchase of a $345,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method, at which time it will be worth $78,000. The computer will replace two office employees whose combined annual salaries are $89,000. The machine will also immediately lower the firm’s required net working capital by $78,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 23 percent. The appropriate discount rate is 11 percent. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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