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a university student painter is considering the purchase of a new air compressor and paint gun...

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 $13,100 and have a useful life of four years, at which time they can be sold for $2,700. The old paint sprayer can be sold now for $610 and could be scrapped for $360 in four years. The entrepreneurial student believes that operating revenues will increase annually by $9,100. 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

  • No

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Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago
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