TheJohnson Research Organization, a nonprofit organization that does notpay taxes, is considering buying laboratory equipment with an estimatedlife of 7 years so it will not have to use outsiders’ laboratories forcertain types of work. The following are all of the cash flows affectedby the decision: Investment (outflow at time 0) $ 5,000,000 Periodic operating cash flows: Annual cash savings because outside laboratories are not used 1,550,000 Additional cash outflow for people and supplies to operate the equipment 350,000 Salvage value after seven years, which is the estimated life of this project 550,000 Discount rate 16 % Required: Calculate the net present value of this decision. Should the organization buy the equipment? (Round present value factors to three decimal places. Negative amount should be indicated by a minus sign.)
