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1.             Scott Investors is considering the purchase of a $500,000 computer that has an

economic life of 5 years. The computer will be depreciated using the 5-year MACRS schedule. The market value of the machine will be $100,000 in 5 years. The use of the computer will eliminate the jobs of 5 office employees whose annual salaries combined are $120,000. It also contributes to a reduction of net operating working capital by $100,000 when they buy the equipment. The corporate tax rate is 34%. Is it worthwhile to buy the equipment if the WACC is 12%?

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