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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

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 $12,900 and have a useful life of four years, at which time they can be sold for $2,500. The old paint sprayer can be sold now for $590 and could be scrapped for $340 in four years. The entrepreneurial student believes that operating revenues will increase annually by $8,900. The tax rate is 22% and the required rate of return is 15%. What is the NPV of the new equipment? (Do not round intermediate calculations. Round the final answer to 2 decimal point.

Should the purchase be made?

multiple choice

Yes

No

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