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A retail chain is evaluating the purchase of new equipment costing $3,20,000, which is expected to generate savings of $75,000 annually for 8 years. The

A retail chain is evaluating the purchase of new equipment costing $3,20,000, which is expected to generate savings of $75,000 annually for 8 years. The equipment has a salvage value of $20,000 at the end of its useful life. The company uses a discount rate of 12%.

Requirements:

  1. Calculate the NPV of the investment.
  2. Compute the IRR of the investment.
  3. Determine the Discounted Payback Period.
  4. Evaluate the sensitivity of the NPV to a 2% increase in the discount rate.

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