A hospital is planning to invest in new medical equipment. The following data is available:

• Equipment 1:

• Initial Cost: $500,000
• Cost of Capital: 9%
• Annual Savings: $150,000 for 5 years

• Equipment 2:

• Initial Cost: $550,000
• Cost of Capital: 10%
• Annual Savings: $160,000 for 5 years

Requirements:

1. Calculate the payback period for each equipment.
2. Calculate the NPV for each equipment.
3. Determine the IRR for each equipment.
4. Advise which equipment the hospital should purchase and provide a rationale.