Corporate Finance
Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 6, Problem 24QAP
Summary Introduction

Adequate information:

Purchasing price of computer = $385,000

Useful life of computer = 5 years

Pre-tax salvage value = $30,000

Saving before taxes = $90,000

Net working capital = $70,000

Book value = $0

Tax rate = 22% or 0.22

Discount rate, r = 9% or 0.09

To compute: Whether to purchase or buy the computer or not.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

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Corporate Finance

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