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Problem 5 (8 marks) Larry's Lunches is considering purchasing a new, energy efficient grill. The grill will cost $20,000 and belongs to an asset class
Problem 5 (8 marks) Larry's Lunches is considering purchasing a new, energy efficient grill. The grill will cost $20,000 and belongs to an asset class that has a CCA rate of 30%. The grill will be sold for scrap after 3 years for $5,000. The grill will have no effect on revenues but will save Larry's $10,000 per year in energy expenses. Larry's tax rate is 35% and the cost of capital is 12%. Prepare a NPV analysis and determine whether Larry's should purchase the new grill. Assume the Accelerated Investment Incentive applies
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