What is the net present worth for this new computer system

Assignment Help Financial Management

Reference no: EM13877758

Kermit is considering purchasing a new computer system. The purchase price is $104974. Kermit will borrow one-fourth of the purchase price from a bank at 10 percent per year compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $8842 at that time. Over the 5-year period, Kermit expects to pay a technician $20,000 per year to maintain the system but will save $65695 per year through increased efficiencies. Kermit uses a MARR of 12 percent to evaluate investments. What is the net present worth for this new computer system?

Reference no: EM13877758

Questions Cloud

Annual compound interest rate : Land is purchased for $75,000. It is agreed that land will be paid for over a 5- year period with annual payments and using a 12 % annual compound interest rate. Each payment is to be $3000 greater than the previous payment. Determine the size of the..

Most important determinant of meeting retirement goals : Most state lotteries in the U.S. give Lottery winners of particularly large prizes the option of taking the total prize as an annuity over several years, usually 10-20, or as a discounted lump sum now. What does this relationship suggest to potential..

Purchased office supplies on account costing : On August 15th RJH Inc purchased office supplies on account costing 13,000. There were no additional purchases during August or September. Office supplies on hand August 1st were worth 2,500, on August 31st were worth 8,000 and on September 30th were..

The presidents executive jet is not fully utilized : The president's executive jet is not fully utilized. You judge that its use by other officers would increase direct operating costs by only $20,000 a year and would save $100,000 a year in airline bills. Assume that the company does not pay taxes. Al..

What is the net present worth for this new computer system : Kermit is considering purchasing a new computer system. The purchase price is $104974. Kermit will borrow one-fourth of the purchase price from a bank at 10 percent per year compounded annually. Kermit uses a MARR of 12 percent to evaluate investment..

Non participating whole life insurance policy : Beth purchased a $50,000 non participating whole life insurance policy. The annual premium was $1,278. The cash value of the policy after 10 years will be $13,740. The future value of $1 deposited at the start of the year for 10 years, assuming 5 per..

Corporate bonds with current yield-real risk-free rate : Pistol Pete's Platinum Palace has outstanding 5 year corporate bonds with a current yield of 6.50%. 5-Year T-Bonds have a current yield of 4.40%. The default risk premium for Pete's bonds is DRP = 0.40%. The liquidity premium on Pete's bonds is 1.70%..

The undergrounds has annual sales : The Underground's has annual sales of $1.46 million. The cost of goods sold is equal to 80 percent of sales. The firm has an average accounts receivable balance of $150,000 and an average accounts payable balance of $163,500. How many days on average..

Privately held developer of advanced security systems : DEC Technologies is a privately held developer of advanced security systems based in Boston. As part of your business development strategy, in late 2008 you initiate discussions with DEC’s founder about the possibility of acquiring the business at th..

User Account

All Pages