12.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 $24,000. 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 Crossing’s 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 period10%12%14%Time period10%12%14%