Seabreeze Creations Seabreeze Creations is considering an investment in a computer that is capable of producing various images that are useful in the production of commercial art

Seabreeze Creations

Seabreeze Creations is considering an investment in a computer that is capable of producing various images that are useful in the production of commercial art. The computer would cost $20,000 and have an expected life of eight years. The computer is expected to generate additional annual net cash receipts (before-tax) of $6,000 per year. The computer will be depreciated according to the straightline method and the firm's marginal tax rate is 25 percent.

1. Refer to Seabreeze Creations. What is the after-tax payback period for the computer project?

a. 7.62  years

1. 1. 2. 3.90  years
      3. 4.44  years
      4. 3.11  years
2. Refer to Seabreeze Creations. What is the after-tax net present value of the proposed project (using a 16 percent discount rate)? Present value tables or a financial calculator are required. a.               $2,261
   1. 2. $(454)
      3. $6,062
      4. $(4,797)