Golden Corporation is con

Golden Corporation is con

Golden Corporation is considering the purchase of new equipment costing $200,000. The expected life of the equipment is 10 years. It is expected that the new equipment can generate an increase in net income of $35,000 per year for the next 10 years. The probabilities for the increase in net income depend on the state of the economy.After taxAfter tax probabilities Net IncomeRecession .3 ($15,000)Normal .5 25,000Boom .2 35,000The equipment can be amortized using straight-line amortization for tax purposes. Golden’s cost of capital is 14%. What is the expected NPV? Should they purchase the new equipment?= $20,00010,000

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