David Booth is considering starting an independent drywall business. In order to start this business, David must invest in tools and equipment. These tools and equipment will cost $30,000. These funds will be acquired via a bank loan at an interest rate of 6%. David estimates that using these tools and equipment will generate $9,000 per year over their 6 years of useful life The tools and equipment have no salvage value at the end of their useful life. Given the initial investment and anticipated returns, should David start his business?

Year PV Return From the Purchase Tools and Equipment 1 2 3 PV for each year at 6% Annual Return (Nominal) 0.943 $9,000 0.89 $9,000 0.84 $9,000 0.792 $9,000 0.747 $9,000 0.705 $9,000 $54,000 4 5 6 total Less the initial $30,000 investment David should