Clarissa Hardware is currently considering the purchase equipment that costs $55 000. As a result of the purchase, it will generate some additional cash flows for the company.

The cash inflows for the years are given as follows:

The first three years - $8 000 per year, the fourth year - $10 000 and the fifth year to the seventh year - $15 000 per year. Assuming the required rate of return = 3%

Assessment Task

Calculate:

1. Discounted payback period

2. Net Present Value (

3. Internal rate of return (

Should the company go ahead with the purchase? Why?