The Johnson Research Organization, a nonprofit organization that does not pay taxes, is considering buying laboratory equipment with an estimated life of seven years so it will not have to use outsiders' laboratories for certain types of work

The Johnson Research Organization, a nonprofit organization that does not pay taxes, is considering buying laboratory equipment with an estimated life of seven years so it will not have to use outsiders' laboratories for certain types of work. The following are all of the cash flows affected by the decision: Use Exhibit A.8.

Investment (outflow at time 0): $5,300,000 

Periodic operating cash flows:   

• Annual cash savings because outside laboratories are not used: 1,530,000 
• Additional cash outflow for people and supplies to operate the equipment: 330,000 

Salvage value after seven years, which is the estimated life of this project: 530,000

Discount rate: 14%

Required:

a. Calculate the net present value of this decision. (Round PV factor to 3 decimal places.)

b. Should the organization buy the equipment?

• Yes
• No