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 $13,300 and have a useful life of four years, at which time they can be sold for $2,900. The old paint sprayer can be sold now for $630 and could be scrapped for $380 in four years. The entrepreneurial student believes that operating revenues will increase annually by $9,3o0. 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 $ Should the purchase be made? Yes O 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% CCA rate.) These two new items cost $13,300 and have a useful life of four years, at which time they can be sold for $2,900. The old paint sprayer can be sold now for $630 and could be scrapped for $380 in four years. The entrepreneurial student believes that operating revenues will increase annually by $9,3o0. 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 $ Should the purchase be made? Yes O No

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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