The law firm of Bushmaster,Cobra and Asp is considering investing in a complete small business computer system.The initial investment will be $35,000 and the hardware,which will be used for 10 years with a salvage value of $5,000,and software of $20,000.In each of years 3,5,and 7,$5,000 will be spent for additional software.Hardware has a CCR rate 45 percent and software is class 12 (100 percent).
The computer system is expected to provide additional revenue of $15,000 per year for the next 10 years,and to reduce expenses by $10,000 per year for the same period.
The firm's cost of capital is 12 percent and its tax rate is 40 percent.Based on a net present value analysis,should this investment be accepted?

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The Answer of The law firm of Bushmaster,Cobra and Asp is considering investing in a complete small business computer system.The initial investment will be $35,000 and the hardware,which will be used for 10 years with a salvage value of $5,000,and software of $20,000.In each of years 3,5,and 7,$5,000 will be spent for additional software.Hardware has a CCR rate 45 percent and software is class 12 (100 percent).
The computer system is expected to provide additional revenue of $15,000 per year for the next 10 years,and to reduce expenses by $10,000 per year for the same period.
The firm's cost of capital is 12 percent and its tax rate is 40 percent.Based on a net present value analysis,should this investment be accepted?

The Law Firm of Bushmaster,Cobra and Asp Is Considering Investing