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Management is considering purchasing an asset for $32,000 that would have a useful life of 4 years and no salvage value. For tax purposes, the entire original cost of the asset would be depreciated over 4 years using the straight-line method. The asset would generate annual net cash inflows of $23,000 throughout its useful life. The project would require additional working capital of $3,000, which would be released at the end of the project. The company's tax rate is 40% and its discount rate is 8%.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

What is the net present value of the asset? (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9977053

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