Contracting LLC is considering the acquisition of a new piece of equipment costing $150,000. The equipment is expected to increase net earnings by $30,000 per year for five years cash flows are expected to improve by $37,500 per year for five years. Income taxes and salvage value are insignificant. The appropriate hurdle rate is 15%.

1. The internal rate of return is closest to: 50%, 40%, 8%, or 0%?

2. The return on average investment is closest to: 50%, 40%, 8%, or 0%?

3. The payback period is closest to: 5 years, 4.5 years, 4 years, or 3 years?

4. The net present value is closest to:

		$100,565
		$125,706
		($49,435)
		($24,294)