2 4 Aaron Heath is seeking part-time employment while he attends school. He is considering purchasing technical equipment that will enable him to start a small training services company that will offer tutorial services over the Internet. Aaron expects demand for the service to grow rapidly in the first two years of operation as customers learn about the availability of the Internet assistance. Thereafter he expects demand to stabilize The following table presents the expected cash flows Year of Operation Cash Inflow Cash Outflow 13 Year 1 $25,000 $12,000 Year 2 $29,000 $16,000 Year 532,000 $18,000 10 Year 4 $32,000 $18,000 11 17 13 in addition to these cash flows, Aaron expects to pay $25,000 for the equipment. He also expects to pay 54,000 for a major overhaul and updating of the equipment at the end of the second year of operation. The equipment is expected to have a 54,000 salvage value and a four-year useful life. Aaron desires to earn a rate of return of percent (PV of 51 and PVA of $11 $25,000 $4,000 $4,000 1% 14 15 Required 16 Calculate the net present value of the investment opportunity 17 Note: Use the cells from the given information to complete this question. Negative amount should be indicated by a minus sign Student should use the built-in Excel function 18 Indicate whether the investment opportunity is expected to earn a return that is above or below the desired rate of return and whether it should be accepted 19 Note: Use the cells from the given information to complete this question 10 23 Net present value 52,454 22 Will the return be above or below the cost of capital? Above 2. Should the investment opportunity be accepted 24 25 20 Accepted 27 Students: The scrunchpad area is for you to do any additional work you need to solve this question or can be used to show your wors 28 Nothing in this wres will be graded, but it will be submitted with your assignment