Considering new cash register system

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Reference no: EM131197802

Wolmart is considering a new cash register system for its Georgia stores. The estimated cost of the new registers (today) is $750,000 and they expect to set aside an additional $25,000 net working capital (today) which will be recovered when the registers are replaced. Additional revenues are expected to be $600,000 per year, while costs associated with running the new system will be $150,000 per year. The registers can be depreciated straight line to zero over 5 years for tax purposes. However, Wolmart expects to replace the system at the end of year 3, and believe that they can sell the old system at that time for $40,000. While overhead will remain at $1 million, $10,000 of this has been allocated to the new registers. If Wolmart is in the 35% tax bracket, and has a required rate of return of 17%, should they buy the new registers? Please show work

Reference no: EM131197802

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