Real Time Inc. the President of Real Time Inc. Has Asked You to Asked

question 114

Multiple Choice

Real Time Inc.
The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $40,000, and it falls into the MACRS 3-year class. Purchase of the computer would require an increase in net working capital of $2,000. The computer would increase the firm's before-tax revenues by $20,000 per year but would also increase operating costs by $5,000 per year. The computer is expected to be used for 3 years and then be sold for $25,000. The firm's marginal tax rate is 40 percent, and the project's required rate of return is 14 percent.
-Refer to Real Time Inc.What is the initial investment outlay required at t = 0?

• A) −$42,000
• B) −$40,000
• C) −$38,600
• D) −$37,600
• E) −$36,600

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