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The Green Office Equipment Company has offered to sell some new packaging equipment to the Natola Company. The list price is $75,000, but Green has
The Green Office Equipment Company has offered to sell some new packaging equipment to the Natola Company. The list price is $75,000, but Green has agreed to allow a trade-in allowance of $22,000 on some old equipment. The old equipment was carried at a book value of $18,300 and could be sold outright for $17,000 cash. Cash-operating savings are expected to be $5,000 annually for the next 10 years. The required rate of return is 10%. The old equipment has a remaining useful life of 10 years. Both the old and the new equipment will have zero disposal values 10 years from now. (Click the icon to view the present value factor table.) (Click the icon to view the present value annuity factor table.) Requirement 1. Should Natola buy the new equipment? Show your computations, using the NPV method. Ignore income taxes. (Enter the present value factor to four decimal places, "X.XXXX." Round dollar amounts the nearest whole number. Use a minus sign or parentheses for a negative net present value.)
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