Project #38001 - finance

Question:

 

You are considering replacing your current computer system with a newer one. the old computer system cost $1M to build nine years ago and is being depreciated on a straight line basis over ten years. If replaced, we would sell the system for $30k immediately.

The new system would increase productivity and dsave 200k/year in labor cost. the system would require an investment of 1.5M and depreciated over 10 years (straight line). the company tax rate is 30%. no additional working capital would be required but training on the new system would cost 70k. at the end of 10 years we expect that the machine could be sold for 80k.

what is the NPV of this investment assuming a cost of capital of 12%?

Subject Business
Due By (Pacific Time) 08/18/2014 11:00 am
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