стр. 108 
81
.5
your answer on the NPV method, assuming that the cost of capital is 8 percent after taxes.
SOLUTION
From Problem 8.3,
I = $48,OOo
n = 10 years
A = $6,5B/year
Therefore,
PV  I = APVIFA  I
NPV =
= $6,528(6.7101) $48,000 = $43,804  $48,000 = $4,196 (rounded)
National Bottles Corporation should not purchase the machine, because the NPV is negative.
230 CAPITAL BUDGETING (INCLUDING LEASING) [CHAP. 8
Computerized Bookkeeping System and NPV Analysis. Zeta Corporation is contemplating the
8.16
purchase of a minicomputer in order to reduce the cost of its dataprocessing operations.
Currently, the manual bookkeeping system in use involves the following annual cash
expenses:
Salaries $ 84,OOo
Payroll taxes and fringe benefits 24,000
Forms and supplies 6.000
$114,000
The present equipment is fully depreciated and has no salvage value. The cost of the
computer, including installation and software, is $100,000.This entire amount is depreciable for
income tax purposes on a double declining basis at the rate of 20 percent per annum.
Annual costs of the computerized bookkeeping system are estimated and given below.
Salaries $40,000
Payroll taxes and fringe benefits 8,000
Forms and supplies 6,000
$54,000
The computer is expected to be obsolete in 3 years, at which time its salvage value is
$10,000.
(a) Compute aftertax cash savings. Assume a 40 percent tax rate. ( b )Decide whether or not
to purchase the computer, using the NPV method. Assume a cost of capital of 10 percent after
taxes.
SOLUTION
Annual cash expenses of the
manual system $114,000
Annual cash expenses of
computerized bookkeeping 54,000
Annual cash savings $60,000
Dou bledecliningbalance met hod:
($100,000 x 20%)
Year I $20,000
($80,000 X 20%)
Year 2 16,000
Year 3 12,800 ($64,000 X 20%)
$48,800
Therefore, aftertax cash savings are computed as follows:
Year 1 Year 2 Year 3
Annual cash savings $60,000 $60,000 $60,000
Depreciation 20,000 16,000 12,800
Net profits before tax $40,000 $44,000 $47,200
Tax (40%) 16,000 17,600 18,880
Net profits after tax $24,000 $26,400 $28,320
Depreciation 20,000 16,000 12,800
$42,400
Aftertax cash inflow $44,000 $41,120
231
CAPITAL BUDGETING (INCLUDING LEASING)
CHAP. 81
(b)
Total PV ($, Rounded)
Year AfterTax Cash Inflow ($) PV of $1 at 10%
44,000 40,000
0.9091
1
35,039
0.8264
2 42,400
30,893
0.7513
41,120
3
7,513
0.7513
10,000"
12.381
0.7513
16,4806
125,826
Salvage.
a
'$16,480is the tax savings from the loss on the disposal of the computer at the end of year 3,
computed as follows:
$ 10,000
Salvage value
51200
Book value ($100,000 $48,800)

$(41,200)
Loss on disposal
Tax (40%)
T x savings (0.4X $41,200)
a $ 16,480
81
.7 Computerized Bookkeeping System and NPV Analysis. Rework Problem 8.16 using the
sumofyears'digits method of depreciation for the computer.
SOLUTION
( a ) The sumofyears'digits depreciation is:
Year Rate Depreciation
($l00,000X3/6)
$ 50,000
3/6
1
2 2/6 33,333 ($100,000 X 2/6)
1t6 16,667 ($100,000 X 1/6)
3
$100,000
Therefore, aftertax cash savings are computed as follows:
Year 1 Year 2 Year 3
$60,000
$60,000
Annual cash savings $6o,OOo
33.333
50,000 16,667
стр. 108 