Riverbed Industries is considering the purchase of new equipment costing $744,000 to replace existing equipment that will be sold for $111,600. The new equipment is expected to have a $124,000 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 18,600 units annually at a sales price of $12 per unit. Those units will have a variable cost of $7 per unit. The company will also incur an additional $55,800 in annual fixed costs.

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(a)Calculate the net present value of the proposed equipment purchase. Assume that Riverbed uses a 7% 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 Riverbed Industries invest in the new equipment?