Madness Investors, Inc., is considering investing $500,000 in a computer with an economic life of...
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Madness Investors, Inc., is considering investing $500,000 in a computer with an economic life of four years. The computer will be fully depreciated over four years using the straight-line method. The market value of the computer is expected to be $100,000 in four years. The computer will replace five offices employees whose combined annual salaries are $295,000 but require a releasing compensation of $35,000. The company will also require a new IT employee that will cost $75,000 annually, plus a bonus sign of $20,000, but can be release for free at the end of the project. The corporate tax rate is 20 percent. Is it worthwhile to buy the computer if the appropriate discount rate is 5 percent?
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