Reference no: EM132936044
Question - The servers of your company, Meteor Inc., have just broken down. Whist you were able to salvage the data, the servers themselves have been deemed completely beyond repair. You ask for a quote to replace the servers, and you receive the following information:
-A new server would cost $200,000 to purchase and install,
-This new server is expected to last 10 years,
-Server maintenance and the license fee for the software will total $5,000 per year
Your company's rate of return is 10% p.a., the corporate tax rate is 30%, and your company uses straight line depreciation for computer equipment.
Required -
1. Calculate the tax shield first year?
2. Calculate the NPV of installing this new server?
3. What is the Equivalent Annual Cost (EAC) of installing the new server?
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