Corporate tax rate and appropriate discount rate

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Reference no: EM13723002

Scott Investors, Inc., is considering the purchase of a $360,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method. The market value of the computer will be $60,000 in five years. The computer will replace five office employees whose combined annual salaries are $105,000. The machine will also immediately lower the firm’s required net working capital by $80,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 34 percent. The appropriate discount rate is 12 percent.

Calculate the NPV of this project.

Reference no: EM13723002

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