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$75,000 for equipment with useful life of 7 years and no salvage value. Maintenance costs are expected to be $2,500 per year and increase by
- $75,000 for equipment with useful life of 7 years and no salvage value.
- Maintenance costs are expected to be $2,500 per year and increase by 3% in Year 6 and each year thereafter.
- Materials in Year 1 are estimated to be $20,000 but remain constant at $10,000 per year for the remaining years.
- Labor is estimated to start at $50,000 in Year 1, increasing by 3% each year after.
Revenues are estimated to be:
Year 1Year 2Year 3Year 4Year 5Year 6Year 7-50,000113,000125,000125,000150,000150,000
The company's required rate of returnand cost of capital is 8%.
Management has turned to its finance and accounting department to perform analyses and make a recommendation on which option to choose. They have requested that the three main capital budgeting calculations be done: NPV, IRR, and Payback Period for each option.
I have made a table, but can't understand how to find the NPV, IRR, and payback period?
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