Payback and NPV evaluation Problose Company plans to acquire some new equipment for its research and development department. The cost of the equipment is $90,000. It is estimated to have a useful life of 7 years and a salvage value of $10,000. The company estimates that use of the equipment will produce cash savings of $25,000 per year. Its cost of capital is 20 percent.

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REQUIRED a. Compute the payback on the equipment. b. Compute the payback reciprocal. c. Compute the net present value. d. Compute the profitability index.