Cost of equipment 15,000 Incremental annual revenue (For 5 yea 80,000 Incremental annual expenses (for 5 ye: 70,000 Other information Assume the estimated life of the equipment is 5 years and that there will be no salvage value. Further, assume the depreciation method used is straight-line. Assume the relevant discount rate for NPV purposes is 8%. Questions 1 Determine the ARR 2 Determine the payback period 3 Determine the NPV ANSWER 1 Incremental annual revenue (For 5 yea 80,000 Incremental annual expenses (for 5 ye: 70,000 Depreciation - Average annual income = Average investment = ARR = 2 Cost of equipment 15,000 Incremental annual revenue (For 5 yea 80,000 Incremental annual expenses (for 5 ye: 70,000 Yearly cash flow = Payback peroid = 3 Discount rate 87. Cost of equipment 15,000 Incremental annual revenue (For 5 yea 80,000 Incremental annual expenses (for 5 ye: 70,000 Yearly cash flow = Annuity factor Year Hence Discount Factor 1 2 3 4 5 Total UAWN NPV =