The Board of Directors of XYZ, Inc is evaluating a new piece of equipment that would decrease operating costs by $50,000. The projects cost is...

The Board of Directors of XYZ, Inc is evaluating a new

piece of equipment that would

decrease operating costs by $50,000. The projects cost

is $70,000. The project has a 3 year

depreciable life and the company will use accelerated

depreciation. At the end of 3 years

the equipment will be scrapped so the salvage value will

be zero. The tax rate is 40% and

the project's cost of capital is 12%.

1) Determine the project's NPV showing all work.

2) Would you purchase the equipment and why?