Triple Crossing Brewing is considering installing a new cooler (equipment) in order to increase the volume and variety of beverages they can offer….

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%

10.9090.8930.87710.9090.8930.877

21.7361.6901.64720.8260.7970.769

32.4872.4022.32230.7510.7120.675

43.1703.0372.91440.6830.6360.592

53.7913.6053.43350.6210.5670.519

64.3554.1113.88960.5640.5070.456

74.8684.5644.28870.5130.4520.400

85.3354.9684.63980.4670.4040.351