Reference no: EM132903746

Question - Anderson Corporation is planning to purchase new computer which would cost $1,850,000. Installation and testing costs would be $35,000 and $25,000 respectively. Once operational, the computer will cause an increase in working capital of $120,000. The new computer is expected to generate increased annual sales of $720,000. Variable costs to operate the computer are estimated at 42% of sales and annual fixed costs would be lowered by $75,000. The computer has an estimate 6 year life and a salvage value of $90,000. The company requires an 11% return on its investments. Ignore income taxes. Use an Excel spreadsheet to calculate NPV, Payback period and IRR.