The law firms weighted average cost of capital

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The law firm of Bushmaster, Cobra and Asp is considering investing in a complete small business computer system. The initial investment will be $50,000. The computer is in the 5-year MACRS category, and the firm's tax rate is 34%. The computer system is expected to provide additional revenue of $32,000 per year for the next six years, and to reduce expenses by $7,000 per year for the same period. a) Calculate the net after-tax cash flows from this investment. b) Calculate the net present value of the system, given that the law firm's weighted average cost of capital is 12%. c) Should they buy the computer system? Please show all work without table or excel.

Reference no: EM131074605

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