For Question number 1.

Deegan Dance Company, Inc, a manufacturer of exercise equipment, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. The firm pays 40 percent taxes on ordinary income and capital gains. Given the information above, compute the incremental annual cash flows. Given the information in a above and 10 percent cost of capital, a. Compute the net present value. b. Compute the payback. c. Compute the IRR. d. Should the project be accepted