The Minock Group, a nonprofit organization that does not pay taxes, is considering buying laboratory equipment with an estimated life of seven years so it will not have to use outsiders' laboratories for certain types of work. The following are all of the cash flows affected by the decision: Use Exhibit A.8 Investment (outflow at time 0) Periodic operating cash flows: Annual cash savings because outside laboratories are not used Additional cash outflow for people and supplies to operate the equipment Salvage value after seven years, which is the estimated life of this project Discount rate Required: a. Calculate the net present value of this decision. Note: Round PV factor to 3 decimal places. Negative amounts should be indicated by a minus sign. b. Should The Minock Group buy the equipment? $5,000,000 950,000 150,000 280,000 6%

The Minock Group, a nonprofit organization that does not pay taxes, is considering buying laboratory equipment with an estimated life of seven years so it will not have to use outsiders' laboratories for certain types of work. The following are all of the cash flows affected by the decision: Use Exhibit A.8 Investment (outflow at time 0) Periodic operating cash flows: Annual cash savings because outside laboratories are not used Additional cash outflow for people and supplies to operate the equipment Salvage value after seven years, which is the estimated life of this project Discount rate Required: a. Calculate the net present value of this decision. Note: Round PV factor to 3 decimal places. Negative amounts should be indicated by a minus sign. b. Should The Minock Group buy the equipment? $5,000,000 950,000 150,000 280,000 6%

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 6EB: The management of Ryland International Is considering Investing in a new facility and the following...

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