New equipment purchase. Presentation Graphics prepares slides and other 1.a. aids for indi- Total present value of viduals making presentations. It estimates it can save $42,000 a year in cash operating costs recurring after-taxo perating for the next five years if it buys a special-purpose colour-slide workstation at a cost of savings, $90,846 $90,000. The workstation qualifies for a capital cost allowance rate of 25%, declining balance, and will have a zero terminal disposal price at the end of year 5. Presentation Graphics has a 12% after-tax required rate of return. Its income tax rate is 40% each year for the next five years.

REQUIRED Compute

(a) net present value,

(b) payback period, and

(c) internal rate of return.

LO1