Anthony Chavez, general manager of the Argentinean subsidiary of Innovation Inc. is considering the purchase of new industrial equipment to improve efficiency at its Cordoba plant. The equipment has an estimated useful life of nine years. The estimated cash flows for the equipment are shown in the table that follows, with no anticipated change in working capital. Innovation has a 14% required rate of return. Assume amortization is calculated on a straight line basis. Assume all cash flows occur at year-end except for inital investment amounts Data Table i Data Table i Data Table Initial investment Annual cash flows from operations (excluding the amortization effect) Cash flow from terminal disposal of equipment $ $ $ 110,000 30,000 0 Present Value of $1 Period 12% 14% 16% 18% 20% 22% 24% 26% 28% 1 0.893 0877 0862 0.847 0833 0820 0.806 0.794 0.781 2 0.797 0.769 0.743 0.718 0.691 0.672 0.650 0.630 0.610 3 0.712 0.675 0.641 0.609 0.579 0.551 0.524 0.500 0.477 4 0.636 0.592 0.552 0.516 0.482 0451 0.423 0.397 0.373 0.567 0.519 0.476 0.437 0.402 0.370 0.341 0.315 0.291 0.507 0.456 0.410 0.370 0.335 0.303 0.275 0.250 0.227 0.452 0.400 0.354 0.314 0.279 0.249 0.222 0.198 0.178 8 0.404 0351 0305 0 266 0 233 0 204 0.179 0 157 0.139 0.361 0.308 0.263 0.225 0.194 0.167 0.144 0.125 0.108 10 0.322 0.270 0.227 0.191 0.162 0.137 0.116 0.099 0.065 Present Value of Annuity of $1 Period 12% 14% 16% 18% 20% 22% 24% 26% 28% 0.693 0.877 0.062 0.647 0.833 0.820 0.008 0.794 0.701 1590 1647 1605 1556 1578 1492 1 457 1 424 1392 2.402 2.322 2.246 2.174 2.105 2.012 1.881 1.923 1.868 3.037 2.914 2.790 2.690 2.500 2.494 2.404 2.320 2.241 5 3505 3433 3274 3127 2 991 2854 2745 2535 2532 3.685 3.498 3325 3.167 3020 2.865 2.759 4.039 3.812 3.605 3.416 3242 3.083 2.937 4.344 4.078 3.837 3.619 3.421 3.241 3.076 4 607 4303 4031 3.786 3 566 3.356 3184 5.216 4.833 4.494 4.192 3.923 3.682 3.465 3.269 Print Done Requirement 1. a. Calculate the NPV (net present value) of the new industrial equipment. (Round your answers to the nearest whole dollar. Use a minus sign or parentheses for a negative net present value.) Annuity PV factor Net Cash Total Present at i-14%, n=9 Inflow Value Net present value: Present value of annuity of equal annual net cash inflows D Net initial investment x per year Net present value b. Calculate the investment's payback period. (Round your answer to two decimal places) The payback period is years. c. Calculate the investment's internal rate of return using a trial-and-error approach and straight-line interpolation as necessary. (Round all interim calculations to three decimal places and the IRR to two decimal places XXX%) The IRR (internal rate of return) is % Requirement 2. Compare and contrast the capital budgeting methods in requirement 1 by completing the following sentences consider(s) only cash flows up to the time when the expected future cash inflows recoup the net initial investment in a project. use(s) a discounted cash flow approach in which all expected future cash inflows and cash outflows of a project are measured as if they occurred at a single point in time ignores) profitability, the time value of money and terminal disposal value. use(s) discounted cash flows to determine the asset's specific rate of return is becoming increasingly important in the global economy by highlighting risky investments, especially when the local environment in an international location is unstable Requirement 3. The controller of Innovation Inc. received Chavez's estimates but adjusted them to capture the added risk of doing the project in Argentina. Recalculate item 1 with a required rate of return of 22% and explain if the project will be approved by Innovation Inc for its Argentinean subsidiary (Round your answers to the nearest whole dollar) Present value of 9-year annuity of S30,000 at 22% Net initial investment Net present value This project be approved by Innovation Inc. because its NPV is