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% CCA rate) These two new items cost $13,000 and have a useful life of four years, at which time they can be sold for $2,600. The old paint sprayer can be sold now for $600 and could be scrapped for $350 in four years. The entrepreneurial student believes that operating revenues will increase annually by $9.000. The tax rate is 22% and the required rate of return is 15%. What is the NPV of the new equipment? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV

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% CCA rate) These two new items cost $13,000 and have a useful life of four years, at which time they can be sold for $2,600. The old paint sprayer can be sold now for $600 and could be scrapped for $350 in four years. The entrepreneurial student believes that operating revenues will increase annually by $9.000. The tax rate is 22% and the required rate of return is 15%. What is the NPV of the new equipment? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

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% 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 for $500 and could be scrapped for $250 in four years. The student believes that operating revenues will increase annually by $8,000. Should the purchase be made? The tax rate is 22% and the required rate of return is 15%.. please Show me the steps don't copy from cheggs .
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