guestlon 1: Evaluating Investment pLojects You are planning to invest $75,000 in new equipment. This investment will generate net cash ows of $30,000 a year for the next 4 years. The salvage value after 4 years is zero. The cost of capital is 25% a year. a) Compute the net present value NPV = $ Enter negative numbers with a minus sign, i.e., -100 not ($100) or (100). Should you Invest? why? YES - the NPV is positive, which indicates that the investment is protable YES - the NPV is negative, which indicates that the investment will reduce costs 9 NO -- the NPV is negative, which indicates that the investment is unprotable J b) Compute the payback period. payback period = years c) Compute the accounting rate of return (ARR). To compute ARR, rst compute: annual depreciation=$ annual income=$ average investment=$ ARR = % If your answer is 10%, enter 10 without the percent sign. d) whlch of the three methods In (a)-(c) should you use In real Ilfe? o NPV only payback method only ARR only always use all three methods to reach the best decision