1. You are evaluating the benefit of a new piece of equipment. The cost is $225,000. The useful life of the equipment is 6 years. The company cost of capital is 4%. The equipment will save the firm $45,000 in year 1-3 The equipment will save the firm $35,000 in year 4, 5 & 6. If the NPV of the project is greater than $50,000, you will buy Will the purchase payback in 6 years? Do you buy the equipment?

2.

Please evaluate the investment below. Is the NPV greater than $50,000?

Initial investment: $500,000

Cost of Capital: 8%

Cash Flows: -10,000, +2,500, +45,000, +110,000, +250,000, +225,000, +225,000