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McPherson Entertainment (ME) is considering the purchase of a new disco ball. ME can purchase...

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Finance

McPherson Entertainment (ME) is considering the purchase of a new disco ball. ME can purchase a new high-tech disco ball for $5000 and sell its old disco ball for $2000. The new disco ball will last for 5 years and save ME $1000 in expenses. The opportunity cost of capital is 10%. The firms tax rate is 10 percent. The new disco ball will be depreciated straight line to zero over its 5-year life. The old disco ball is fully depreciated. What is the NPV of the project?

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