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%?
Recently Asked Questions
- Please refer to the attachment to answer this question. This question was created from Week 9 Quiz.pdf.
- Compare and contrast a job order costing system and a process costing system. Give examples of situations in which it would be appropriate to use each system
- 1. The world interest rate is r * = 0.043 that is 4.3 percent and for a certain small economy, the following information applies: C = 2,000 + 0.8(Y-T), I =