Network Service Centre Is Considering Purchasing a New Computer Network

question 132

Essay

Network 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 $9500 and return $5000 in working capital.Ignore taxes.
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:

Dishonored

A term used when a financial instrument like a check or promissory note is not accepted or paid on presentation.

Personal Defenses

Legal defenses that can be used to avoid enforcement of a contract or negotiation due to personal circumstances, such as minority, incapacity, or duress.

Illegality

The quality or condition of being contrary to law or forbidden by law.

Breach Of Contract

The violation of any term of a contract without a legitimate legal excuse, which allows the other party to the contract to seek legal remedies.