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Use the Following Information to Answer the Question(s)below

question 53

Multiple Choice

Use the following information to answer the question(s) below.
Two years ago,Krusty Krab Restaurant purchased a grill for $50,000.The owner,Eugene Krabs,has learned that a new grill is available that will cook Krabby Patties twice as fast as the existing grill.This new grill can be purchased for $80,000 and would be depreciated straight line over 8 years,after which it would have no salvage value.Eugene Krab expects that the new grill will produce EBITDA of $50,000 per year for the next eight years while the existing grill produces EBITDA of only $35,000 per year.The current grill is being depreciated straight line over its useful life of 10 years after which it will have no salvage value.All other operating expenses are identical for both grills.The existing grill can be sold to another restaurant now for $30,000.Krusty Krab's tax rate is 21%.
-If Krusty Krab's opportunity cost of capital is 12%,then the NPV for upgrading to the new grill is closest to:

Definitions:

Incremental Value

The additional value created by a particular decision, project, or action over what would have occurred without it.

Merger Premium Per Share

The extra amount paid over the market price per share when one company acquires another.

Market Price

The active market price for exchanging assets or services between parties.

Equity-Financed

Refers to the method of funding a company or its operations through the sale of shareholder equity rather than debt.