Next Service Centre Is Considering Purchasing a New Computer Network

question 125

Essay

Next Service Centre is considering purchasing a new computer network for $82,000.It will require additional working capital of $13,000.Its anticipated eight-year life will generate additional client revenue of $33,000 annually with operating costs, excluding depreciation, of $15,000.At the end of eight years, it will have a salvage value of $9,500 and return $5,000 in working capital.Taxes are not considered.Required:
a.If the company has a required rate of return of 14%, what is the net present value of the proposed investment?
b.What is the internal rate of return?

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Definitions:

Pay

The earnings given to an individual by an employer or client in return for their work or services, often specified as an hourly wage or salary.

Positive Emotions

Feelings that are generally uplifting and pleasant, such as joy, gratitude, serenity, interest, hope, pride, amusement, inspiration, awe, and love.

Interactional Fairness

The perceived fairness of the communication processes and interpersonal interactions by which organizational decisions are implemented and conveyed.

Job Satisfaction

The level of contentment employees feel about their work, which can affect their performance and overall well-being.