Question: Printing World thinks it may need a new colour printing press. The press will cost $520,000 but will substantially reduce annual operating costs by $189,000

Printing World thinks it may need a new colour printing press. The press will cost $520,000 but will substantially reduce annual operating costs by $189,000 a year, before tax. The press has a 30% CCA rate and will be in its own asset pool. The first CCA deduction is made in year 0. The press will operate for 4 years and then be worthless. The cost of equity for Printing World is 10%, the cost of debt is 9%, and the companys target debt-equity ratio is 0.50. The companys tax rate is 30%.

a. What is the NPV of buying the press? (Do not round intermediate calculations. Round your answer to the nearest dollar.)

NPV of buying the press $

b. The equipment manufacturer is offering to lease the press for $119,000 a year, for 4 years, payable in advance. Should Printing World accept the offer?

Printing World should (Click to select) reject accept the project.

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