Question

please show work!

Question 1 Your answer is partially correct. Try again. Grouper Industries is considering the purchase of new equipment costing $696,000 to replace existing equipment that will be sold for $104,400. The new equipment is expected to have a $116,000 salvage value at the end of its 2-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 17,400 units annually at a sales price of $12 per unit. Those units will have a variable cost of $7 per unit. The company will also incur an additional $52,200 in annual fixed costs. Click here to view the factor table. (a) Calculate the net present value of the proposed equipment purchase. Assume that Grouper uses a 7% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, e.g. 58,971. Enter negative amount using a negative sign preceding the number e.g. -59,992 or parentheses e.g. (59,992).) 427362 Net present value $L

Answer 1

Annual profit = (12-7)*17400-52200 = $34800

Net present value = present value of annual profit +present value of residual value - Net cash outflows

= 34800*1.808 + 116000*0.873 - (696000-104400)

= - 427362