help

Ferrent is debating whether to invest in new equipment to manufacture industrial distilling vats. The new equipment would cost $1,600,000 and would have an estimated eight-year life and no salvage value. The estimated annual operating results with the new equipment are as follows. All revenue from the sale of industrial distilling vats and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes. Compute the following for Ferrent's investment in the new equipment. a. Annual cash flows. b. Payback period. c. Return on average investment. d. Total present value of the expected future annual cash inflows, discounted at an annual rate of 20 percent. e. Net present value of the proposed investment discounted at 20 percent