A firm can purchase new equipment for

$20,500

that generates an annual cash inflow of

$7,000

for

5

years.a. Determine the net present value

(NPV)

of the asset, assuming that the firm has a cost of capital of

12%.

Is the project acceptable?

b. Determine the maximum required rate of return that the firm can have and still accept the asset.

a.The net present value (NPV) of the new equipment is

$nothing.

(Round to the nearest cent.)

Based on its NPV, is the new equipment acceptable? (Select the best answer below.)

Yes

No

b.The maximum required rate of return the firm can have and still accept the new equipment is

nothing%.

(Round to two decimal places.)