Toronto Skaters Is Considering the Purchase of a New Computer

question 110

Multiple Choice

Toronto Skaters is considering the purchase of a new computer system for $150,000.The asset has an economic life of four years,a CCA rate of 45 percent,and expected salvage value of $10,000.The project also requires an investment in net working capital of $7,500,which will be recovered at the end of the project.The project is expected to generate after-tax operating income of $80,000 per year.Assume the asset class remains open after the asset is sold.The firm's cost of capital is 18 percent and marginal tax rate is 40 percent.What is the NPV of the project?

• A) $104,845.95
• B) $18,763.97
• C) $105,330.16
• D) $108,477.53

---

Definitions:

Expectations

Beliefs or predictions about future events, often influencing behavior and decision-making.

Seven-step Procedure

A structured process often followed in problem-solving or decision-making that involves steps from understanding the issue to implementing solutions.

Socializing Employees

The process of introducing new employees to the organization's culture, values, and accepted behaviors to facilitate their integration and performance.

Strong Cultures

Refers to organizational cultures with deeply ingrained values, norms, and behaviors that are widely shared and strongly upheld.