Chapter $26$ Homework Mastery Problem

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Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its computer furniture line, The equipment is expected to cost $$305,520$ and to have a six$-$year life and no salvage value. The equipment is expected to generate income of $$12,839$ and net cash flow of $$66,088$ in each year of its six$-$year life. Santana requires an $9\%$ return on all investments. $($PV of $$1,$ FV of $$1,$ PVA of $$1,$ and FVA of $$1)$

Note: Use appropriate factor$($s$)$ from the tables provided.$)($Negative net present values should be indicated with a minus sign. Do not round intermediate calculations. Round your present value factor to $4$ decimals and final answers to the nearest whole number.

Required:

$1-$a$.$ Compute the payback period for this equipment.

$1-$b$.$ Compute the net present value for this equipment.

$1-$c$.$ Compute internal rate of return for this equipment.

$2.$ If Santana requires investments to have payback periods of four years or less, should she invest in this equipment?

$3.$ If Santana requires investments to have at least an $9\%$ internal rate of return, should she invest in this equipment?

Complete this question by entering your answers in the tabs below.

Req $1A$

Req $1$B

Req $1C$

Compute the payback period for this equipment.