Norway Communications, Inc., is considering the purchase of a new piece of computerized data transmission equipment. Estimated annual net cash inflows for the new equipment are $520,000. The equipment costs $1.98 million, it has a five-year life, and it will have no residual value at the end of the five years. The company has a minimum rate of return of 8 percent.
Required:
a. Compute the net present value of the piece of equipment. Use the table B.3 in Appendix B on present and future values. (Omit the "tiny_mce_markerquot; sign in your response.) Net Present Value $
b. Should the company purchase it?