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What is the npv of the new equipment

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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 $13,200 and have a useful life of four years, at which time they can be sold for $2,800. The old paint sprayer can be sold now for $620 and could be scrapped for $370 in four years. The entrepreneurial student believes that operating revenues will increase annually by $9,200. The tax rate is 22% and the required rate of return is 15%.

Problem 1: What is the NPV of the new equipment?

Reference no: EM132787234

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