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Cowboy Recording Studio is considering the investment of $133,000 in a new recording equipment. It is estimated that the new equipment will generate additional cash
Cowboy Recording Studio is considering the investment of $133,000 in a new recording equipment. It is estimated that the new equipment will generate additional cash flow of $19,500 per year for each year of its 7-year life and will have a salvage value of $13,000 at the end of its life. Cowboys's financial managers estimate that the firm's cost of capital is 8%. Use Table 6-4 and Table 6-5. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.) Required:
- Calculate the net present value of the investment.
- Calculate the present value ratio of the investment.
- What is the internal rate of return of this investment, relative to the cost of capital?
- Calculate the payback period of the investment.
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