Question: The law firm of bushmaster, cobra, and asp is considering investing in a complete small business computer system. the initial investment will be $35,000. the computer is depreciated on a straight-line basis over 5 years, and the firm's tax rate is 34%. the computer system is expected to provide additional revenue of $15,000 per year for the next six years, and to reduce expenses by $10,000 per year for the same period.
1) Calculate the net after-tax cash flows from this investment.
2) Calculate the net present value of the system, that the law firm's weighted average cost of capital is 12%.
3) Should they buy the computer system?