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A local gas station owner, Paul, is looking to invest in LED lighting displays around his fuel pumps to distinguish his station from the one
A local gas station owner, Paul, is looking to invest in LED lighting displays around his fuel pumps to distinguish his station from the one just down the street. He has received several bids from credible companies, none of which have worked with Paul before. He knows this type of investment is needed to keep his business looking current and trendy, but he is anything but "pumped" about spending this much money on a lighting display. Based on significant research and discussions with friends in the industry, he makes the following estimates to go along with each bid. The useful life of all three lighting schemes is 15 years, at which point none of them would have any salvage value. Paul's station is subject to a 25% tax rate and has a required rate of return of 9% on new projects. Click here to view the factor table (a) Determine the present value of the future cash flows for each bid, and then determine the NPV of each bid overall. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
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