Depreciated over five years using the straight-line method

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Reference no: EM131010325

Scott Investors, Inc., is considering the purchase of a $363,000 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 $63,000 in five years. The computer will replace 5 office employees whose combined annual salaries are $108,000. The machine will also immediately lower the firm’s required net working capital by $83,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 35 percent. The appropriate discount rate is 13 percent.

Reference no: EM131010325

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