An organization decided to invest in new office equipment for $320,000. The estimated useful life of the equipment is four years. The residual value will be $40,000. The depreciation method is straight-line. The new equipment will allow the organization to save $150,000 per year. The estimated tax rate used in the organization is 30 percent. The required rate of return is 15 percent.
The following are present values of $1 during four years for 15 percent:
Year 1 = $0.87
Year 2 = $0.76
Year 3 = $0.66
Year 4 = $0.57
What is net present value of this investment?
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