Elgin Restaurant Supplies is analyzing the purchase of manufacturing equipment that will cost $30,000. The annual cash inflows are as follows. Year Cash Flow

16000

14500

11500

a) Determine the IRR using interpolation

Note:IRR is the interest rate that creates an NPV = 0

Note: find one interest rate that gives you an NPV that is negative and one that gives you an NPV that is positive and then interpolate the value that gives an NPV of zero .

b) With a cost of capital at 18% should the company make this investment? Note: compute the NPV c) Compute the profitability index (PI)