A firm, whose cost of capital is 9 percent, may acquire equipment for $110,783 and rent it to someone for a period of five years.

a) If the firm charges $32,270 annually to rent the equipment, what are the net present value and the internal rate of return on the investment? Use Appendix D to answer the questions. Use a minus sign to enter negative values, if any. Round your answers for the net present value to the nearest dollar and for the internal rate of return to the nearest whole number.

NPV: $_____

IRR: ______%

Should the firm acquire the equipment?

The firm _____(should/should not) acquire the equipment as the net present value is _____(positiveegative), and the internal rate of return _____(exceeds/is lower) than the firm's cost of capital.

b) If the equipment has no estimated residual value, what must be the minimum annual rental charge for the firm to earn the required 9 percent on the investment? Use Appendix D to answer the question. Round your answer to the nearest dollar.

$_____

c) If the firm can sell the equipment at the end of the fifth year for $10,750 and receive annual rent payments of $32,270, what are the net present value and the internal rate of return on the investment? Use Appendix B and Appendix D to answer the questions. Use a minus sign to enter negative values, if any. Round your answers for the net present value to the nearest dollar and for the internal rate of return to the nearest whole number.

NPV: $_____

IRR: ______%

What is the impact of the residual?

The residual value _____(increases/decreases) both the NPV and IRR.

d) If the $10,750 residual resulted in the firm charging only $30,120 for the rental payments, what is the impact on the investments net present value? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar.

Reducing the rental payments and recouping it through the residual value _____(reduces/increases) the net present value by $_____ .