Grady Corp. is considering the purchase of a new piece of equipment. The equipment costs $50,200, and will have a salvage value of $5,060 after eight years. Using the new piece of equipment will increase Gradys annual cash flows by $6,130. Grady has a hurdle rate of 13%. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor from the PV tables.)

a. What is the present value of the increase in annual cash flows? (Round your answer to 2 decimal places.)

b. What is the present value of the salvage value? (Round your answer to 2 decimal places.)

c. What is the net present value of the equipment purchase? (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 purchase the equipment?

multiple choice

• Yes

• No