Use the following information to answer the following 3 questions.
Your company is facing earnings pressure and is considering acquiring a new computer system that will initially cost $1 million and will save $300,000 per year in inventory and receivables management costs. The system is will last for five years.
The system is expected to have a salvage value of $100,000 at the end of year 5 and will be depreciated to zero using three year MARCS (rates are: Year 1: .3333, Year 2: .4445, Year 3: .1481, Year 4: .0741).
The marginal tax rate is 40%. Assume a required rate of return of 11%.
- Cash Flow From Assets in Year 5 is:
- $180,000
- $280,000
- $240,000
- $300,000
- Net Present Value is:
- $28,123.68
- $28,744.07
- $32,465.21
- $27,682.15
- Internal Rate of Return is: