Business, 18.02.2020 05:29, jpatte2oye8qv

South Tel Communications is considering the purchase of a new software management system. The system is called B-lmage, and it is expected to reduce drastically the amount of time that
company technicians spend installing new software. South Tel's technicians currently spend 6,000 hours per year on installations, which costs South Tel $25 per hour. The owners of the B-lmage system claim that their software can reduce time on task by at least 25%. The system requires an initial investment of $55,000 and an additional investment of $10,000 for technician training on the new system. Annual upgrades will cost the firm $15,000 per year. The tax treatment of software purchases sometimes calls for amortization of the initial cost over time; sometimes the cost can be expensed in the year of the purchase. Before the tax experts are consulted and for purposes of this initial analysis, South Tel has decided that it will expense the cost of the software in the year of the expenditure. South Tel faces a 3096 tax rate and uses a 9% cost of capital to evaluate projects of this type.

a. Assume that South Tel has sufficient taxable income from other projects so that it can expense the cost of the software immediately. What are the free cash flows for the project for years zero through five?
b. Calculate the NPV and IRR for the project.

Answers: 3

Show answers

Other questions on the subject: Business

Business, 22.06.2019 00:40, lindseybug

Guardian inc. is trying to develop an asset-financing plan. the firm has $450,000 in temporary current assets and $350,000 in permanent current assets. guardian also has $550,000 in fixed assets. assume a tax rate of 40 percent. a. construct two alternative financing plans for guardian. one of the plans should be conservative, with 70 percent of assets financed by long-term sources, and the other should be aggressive, with only 56.25 percent of assets financed by long-term sources. the current interest rate is 12 percent on long-term funds and 7 percent on short-term financing. compute the annual interest payments under each plan.

Answers: 3

continue

Business, 22.06.2019 10:20, Sparkledog

Blue spruce corp. has the following transactions during august of the current year. aug. 1 issues shares of common stock to investors in exchange for $10,170. 4 pays insurance in advance for 3 months, $1,720. 16 receives $710 from clients for services rendered. 27 pays the secretary $740 salary. indicate the basic analysis and the debit-credit analysis.

Answers: 1

continue

Business, 23.06.2019 00:00, zhellyyyyy

The gorman group is a financial planning services firm owned and operated by nicole gorman. as of october 31, 2016, the end of the fiscal year, the accountant for the gorman group prepared an end-of-period spreadsheet, part of which follows:

Answers: 2

continue

Business, 23.06.2019 02:50, kevinh2683

Expert computers was started in 2018. the company experienced the following accounting events during its first year of operation: started business when it acquired $40,000 cash from the issue of common stock. purchased merchandise with a list price of $32,000 on account, terms 2/10, n/30. paid off one-half of the accounts payable balance within the discount period. sold merchandise on account for $28,000. credit terms were 1/20, n/30. the merchandise had cost expert computers $16,000. collected cash from the account receivable within the discount period. paid $2,100 cash for operating expenses. paid the balance due on accounts payable. the payment was not made within the discount period. required record the events in a horizontal statements model below. in the cash flows column, use the letters oa to designate operating activity, ia for investing activity, fa for financing activity, or nc for net change in cash. if the account is not affected by the event, leave the cell blank. the first event is recorded as an example. what is the amount of gross margin for the period? what is the net income for the period?

Answers: 1

continue

Do you know the correct answer?

South Tel Communications is considering the purchase of a new software management system. The system...