Cowboy Recording Studio is considering the investment of $136,300 in a new recording equipment. It is estimated that the new equipment will generate additional cash flow of $20,000 per year for each year of its 8-year life and will have a salvage value of $13,500 at the end of its life. Cowboys financial managers estimate that the firms cost of capital is 10%. Use Table 6-4 and Table 6-5.

Note: Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.

Required:

Calculate the present value ratio of the investment.

Table 6-4: Factors for Calculating the Present Value of $1 Table 6-5: Factors for Calculating the Present Value of an Annuity of $1