In: Accounting
The Cupcake Company is considering purchasing a new oven which will reduce baking time. Because of reduced baking time, the Company expects that revenues would be increased by $1,500 per year for the next 10 years. The electrical costs for the Company are expected to increase $200 in the same 10 years. The oven would cost $9,000 and would have a residual value of $1,000 at the end of the tenth year. The company would dispose of their current oven to make room and expects to earn $500 from that sale. Assuming a 12% required rate of return. Calculate the net present value of the investment. A negative net present value should be identified with a "-" sign in front of the number.