Unformatted text preview: 10% Economic life 10 years Requirements: a. Write a letter to the president of the company explaining whether the company should acquire the computer system. Utilize both NPV and IRR. Assume that the initial $17,850,000 in annual revenues will grow at a 6% annual rate and that the initial $12,950,000 in annual expenses will grow at a 5% annual rate. The growth starts in year 2 from year 1, i.e. the revenue is year 2 is 18,921,000, etc. Working capital is released at the end of the project. b. Redo this analysis above using sum-of-years digits depreciation method. What happens to the results and would you change your recommendation?...
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This note was uploaded on 12/06/2009 for the course MGMT 122 taught by Professor Saouma during the Spring '08 term at UCLA.
- Spring '08