Explore BrainMass
Share

Explore BrainMass

    What is the project's NPV for acquisition of new computer?

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Evaluate the proposed acquisition of a new computer. The computer's price is $40,000, and it falls into the MACRS 3-year class. Purchase of the computer would require an increase in net operating working capital of $2,000. The computer would increase the firm's before-tax revenues by $20,000 per year but would also increase operating costs by $5,000 per year. The computer is expected to be used for 3 years and then be sold for $25,000. The firm's marginal tax rate is 40 percent, and the project's cost of capital is 14 percent. Showing the computation what is the project's NPV?

    © BrainMass Inc. brainmass.com October 9, 2019, 5:31 pm ad1c9bdddf
    https://brainmass.com/business/net-present-value/what-is-the-project-s-npv-for-acquisition-of-new-computer-59919

    Solution Summary

    With careful calculations in an Excel format, the response clearly answers the problem.

    $2.19