The law firm of abc is seeing investing in complete small business computer system. The initial investment will be $35,000 the computer is in the 5-year straight line category and the firm's tax rate is 34%. The computer system is expected to deliver 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.
(a) Compute the net after-tax cash flows from this investment.
(b) Compute the net present value of the system that the law firm's weighted average cost of capital is 12%.
(c) Must they buy the computer system?