A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer. (Both items belong to Class 9 and have a 25 percent CCA rate.) These two new items cost $12,000 and have a useful life of four years, at which time they can be sold for $1,600. The old paint sprayer can be sold now for $500 and could be scrapped for $250 in four years. The entrepreneurial student believes that operating revenues will increase annually by $8,000. The tax rate is 22 percent and the required rate of return is 15 percent. What is the NPV of the new equipment? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) NPV $ Should the purchase be made? Yes No
A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer. (Both items belong to Class 9 and have a 25 percent CCA rate.) These two new items cost $12,000 and have a useful life of four years, at which time they can be sold for $1,600. The old paint sprayer can be sold now for $500 and could be scrapped for $250 in four years. The entrepreneurial student believes that operating revenues will increase annually by $8,000. The tax rate is 22 percent and the required rate of return is 15 percent. What is the NPV of the new equipment? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) NPV $ Should the purchase be made? Yes No
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer. (Both items belong to Class 9 and have a 25 percent CCA rate.) These two new items cost $12,000 and have a useful life of four years, at which time they can be sold for $1,600. The old paint sprayer can be sold now for $500 and could be scrapped for $250 in four years. The entrepreneurial student believes that operating revenues will increase annually by $8,000. The tax rate is 22 percent and the required |
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What is the NPV of the new equipment? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) |
| NPV | $ |
| Should the purchase be made? | ||||
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