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Determining the straight-line method

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Market Top Inventors is considering the purchase of a $385,000 computer with an economic life of five years. The computer will be fully depreciated over 5 years using the straight-line method, at which time it will be worth $30,000. The computer will replace two office employees whose combined annual salaries are $90,000. The machine also will immediately lower the firm's required net working capital by $70,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 22 %. Is it worthwhile to buy the computer if the appropriate discount rate is 9%?

Reference no: EM132794176

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