Question:
Norway Jose Communications, Inc., is considering purchasing a new piece of computerized data transmission equipment. Estimated annual net cash inflows for the new equipment are $590,000. The equipment costs $2 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 12%. Compute the net present value of the piece of equipment. Should the company purchase it? Why? Hint: Use Tables 1 and 2 in the Appendix C.)