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Calculate the net present value for the new computer system

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Reference no: EM132533847

C management estimates that if it invests $250,000 in a new computer system, it can save $65,000 in annual cash operating costs. The system has an expected useful life of eight years and disposal value for old system $28,500. The required rate of return is 8%. Income tax issues at a 40% rate and assume all cash flows occur at year-end except for initial investment amounts. Additional working capital, $30,000.

Required:

Calculate the following for the new computer system:

Question a. net present value

Question b. payback period

Question c. Accrual accounting rate of return based on net initial investment

Question d. Accrual accounting rate of return based on average investment

Question e. What other factors should Home Value consider in deciding whether to purchase the new computer system?

Reference no: EM132533847

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