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Network Service Center 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?
Reserve Price
The reserve price is the minimum price a seller is willing to accept for an item in an auction.
English Auction
An English auction is a common type of auction where bidders openly bid against each other, with each subsequent bid higher than the previous one, until the highest bid is reached, and the item is sold to the highest bidder.
Reservation Price
The highest amount of money a buyer is comfortable spending on a product or service, representing their limit before withdrawing from a transaction.
Expected Revenue
The predicted amount of money that a business will bring in from its operations or activities, typically within a certain period.
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