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    After Tax Net cash flows, NPV and purchase decision

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    The law firm of Bushmaster, Cobra and Asp is considering investing in a complete small business computer system. The initial investment will be $35,000. The computer is in the 5-year MACRS category, and the firm's tax rate is 34%. The computer system is expected to provide additional revenue of $15,000 per year for the next six years, and to reduce expenses by $10,000 per year for the same period.
    (a) Calculate the net after-tax cash flows from this investment.
    (b) Calculate the net present value of the system, that the law firm's weighted average cost of capital is 12%.
    (c) Should they buy the computer system?

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    https://brainmass.com/business/capital-budgeting/after-tax-net-cash-flows-npv-and-purchase-decision-202533

    Solution Preview

    The law firm of Bushmaster, Cobra and Asp is considering investing in a complete small business computer system. The initial investment will be $35,000. The computer is in the 5-year MACRS category, and the firm's tax rate is 34%. The computer system is expected to ...

    Solution Summary

    This provides the steps to compute the after Tax Net cash flows, NPV and purchase decision

    $2.19