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A company is considering buying a new system, the cost of the system is $25,000 , and the system will serve for 4 years, and the devices for the system are then sold for $3,000

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A company is considering buying a new system, the cost of the system is $25,000 , and the system will serve for 4 years, and the devices for the system are then sold for $3,000 . The Income Tax Law allows for the full depreciation of the assets' value, and in an accelerated manner, within four years and by using the sum of years numbers method. The system needs to hire a programmer with an annual salary of $3,500 , and the savings that the system will give are $12,000 annually. The company is subject to an income tax rate of 15% and the company requires an annual return on investment of 20%. Required:

1- Determining the current value of the tax savings resulting from using the sum of years numbers method instead of the fixed-section method, assuming that there is no residual value for the asset at the end of its useful life in both methods.

2- Determining the net present value after income tax for the amount collected from the sale of the asset at the end of its useful life.

3- Determining the net present value of the project and whether the company should invest in it or not.