Novak Industries is considering the purchase of new equipment costing $516,000 to replace existing equipment that will be sold for $77,400. The new equipment is expected to have a $86,000 salvage value at the end of its 2-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 12,900 units annually at a sales price of $9 per unit. Those units will have a variable cost of $5 per unit. The company will also incur an additional $38,700 in annual fixed costs. Click here to view the factor table. (a) Calculate the net present value of the proposed equipment purchase. Assume that Novak uses a 5% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971. Enter negative amount using a negative sign preceding the number e.g. -59,992 or parentheses e.g. (59,992).)

Net present value

$

(b) Do you recommend that Novak Industries invest in the new equipment?