Triple Crossing Brewing is considering installing a new cooler (equipment) in order to increase the volume and variety of beverages they can offer. The new cooler will cost $26,000. It is expected to last 7 years but only if the cooler is overhauled (REPAIRED) at a cost of $4,000 at the end of year 4. The new cooler is expected to have a $2,000 salvage value at the end of 7 years. The new cooler is expected to generate additional revenues of $15,000 per year with an increase in expenses of $9,000 per year.Triple Crossings discount rate is 12%. What is the net present value of this investment opportunity? Should they invest in the cooler?

Hint: determine the PV of each item. Be careful if the item is an annuity (annual) or one time only event.

PV of an annuity of $1PV of $1

Time period

10%

12%

14%

Time period

10%

12%

14%

1

0.909

0.893

0.877

1

0.909

0.893

0.877

2

1.736

1.690

1.647

2

0.826

0.797

0.769

3

2.487

2.402

2.322

3

0.751

0.712

0.675

4

3.170

3.037

2.914

4

0.683

0.636

0.592

5

3.791

3.605

3.433

5

0.621

0.567

0.519

6

4.355

4.111

3.889

6

0.564

0.507

0.456

7

4.868

4.564

4.288

7

0.513

0.452

0.400

8

5.335

4.968

4.639

8

0.467

0.404

0.351