Market Top Investors, Inc., is considering the purchase of a $460,000 computer with an economic...
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Market Top Investors, Inc., is considering the purchase of a $460,000 computer with an economic life of six years. The computer will be fully depreciated over six years using the straight-line method, at which time it will be worth $120,000. The computer will replace two office employees whose combined annual salaries are $96,000. The machine will also immediately lower the firms required net working capital by $85,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 25 percent. The appropriate discount rate is 10 percent.
Calculate the NPV of this project.
| Is it worthwhile to buy the computer? |
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