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 $12,700 and have a useful life of four years, at which time they can be sold for $2,300. The old paint sprayer can be sold now for $570 and could be scrapped for $320 in four years. The entrepreneurial student believes that operating revenues will increase annually by $8,700. The tax rate is 22% and the required rate of return is 15%. What is the NPV of the new equipment?
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 $12,700 and have a useful life of four years, at which time they can be sold for $2,300. The old paint sprayer can be sold now for $570 and could be scrapped for $320 in four years. The entrepreneurial student believes that operating revenues will increase annually by $8,700. The tax rate is 22% and the required rate of return is 15%. What is the NPV of the new equipment?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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 $12,700 and have a useful life of four years, at which time they can be sold for $2,300. The old paint sprayer can be sold now for $570 and could be scrapped for $320 in four years. The entrepreneurial student believes that operating revenues will increase annually by $8,700. The tax rate is 22% and the required
What is the NPV of the new equipment?
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