Gallatin inc., has assembled the estimates shown below relating to a proposed new investmant with a 5 year life. if the investment is undertaken, new equipment must be purchased and existing old equipment will be sold immediately. the new equipment will have no salvage value at the end of the 5 year project.

To receive credit you need to show work. For NPV and IRR, use tables in APP 12-B rather than results from a financial calculator to demonstrate your understanding of cash flows and table factors. Use the following information for questions 1 - 3 Gallatin, Inc., has assembled the estimates shown below relating to a proposed new investment with a 5-year life. If the investment is undertaken, new equipment must be purchased and existing old equipment will be sold immediately. The new equipment will have no salvage value at the end of the 5 year project. Annual cash sales 450,000 Annual out-of-pocket cash expenses $ 340,000 Annual depreciation on new equipment 60,000 Initial cost of new equipment 400,000 Sale of old equipment 25,000 Required: 1. Compute the payback period for the investment (2 points) 2. Compute the investment's approximate IRR (3 points). 3. Compute the investment's simple rate of return (2 points)