Business, 11.10.2020 14:01 Treshard

EE printing is in the evaluation process for the acquisition of a new computer system. The total depreciable base (cost plus installation) is $180,000. The new equipment will increase earnings before depreciation and taxes by $60,000 during years 1 to 3 and $32,000 during years 4 to 6.
EE marginal tax rate is 40% and Cost of Capital is 11%

A. Calculate the Net Present Value
((USE TABLES 12.11 AND 12.12 (SLIDES 20 & 21)
USE THE PRESENT VALUE FORMULA TO CALCULATE PRESENT VALUE OF CASH FLOWS. DO NOT MAKE INTERMEDIATE ROUNDINGS AND PRESENT YOUR FINAL ANSWER ROUNDED WITH ZERO DECIMAL PLACES))

B. Calculate the Payback Period
((PRESENT YOUR ANSWER ROUNDED TO 2 DECIMAL PLACES))

C. Based on Net Present Value, is the acquisition of the equipment a good investment? True/ False

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