Grady Corp. is considering the purchase of a new piece ot equipment Ine equipmen

Question

Grady Corp. is considering the purchase of a new piece ot equipment Ine equipment casts S50,400, and will have a salvage value ot S5,110 atter nine years. Using the new piece ot equipment will increase Grady's annual cash tlows by $,160. Grady has a hurdle rate of 13% (Future ValueOft1 Present' al eOfS1. FutureValueAnnuity $1 Present Value Annuity 1.)(Use appropriate factor from the PV tables.) a. What is the present value of the increase in annual cash lows? (Round your answer to 2 decimal places. b. What is the present value of the salvage value? (Round your answer to 2 declimal places.) c. What is the net proscnt valuc of the oquipment purchasc? (Negative value should be indicated by a minus sign. Round your intermediate calculation and final answer to 2 decimal places.) d. Based on financial factors, should Grady Ruchase the equipment? O No

Explanation / Answer

a Present value = 6160*5.1317= $31611.27 b Present value = 5110*0.3329= $1701.12 c Net present value = (31611.27+1701.12)-50400= -17087.61 d No

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