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
- Year 0 1 2 3 Cash flow $-16775 $4575 $5500 $9180 Disc rate 6.50% PV Factor 1 .93897 .88166 .82785 NPV -$30.44 What is the break even cash flow for year 0, in
- For the attached, it appears that I just use the business class written in the instructions. I’m struggling with producing the remaining java files
- Please refer to the attachment to answer this question. This question was created from Chapter 20 Practice Quiz. Additional comments: "the option are -