Innovative Technologies Company (ITC) is contemplating the acquisition of a new equipment to replace an exiting machinery. The Current machinery was purchased 2 yrs ago at an installed cost of $60,000 and can be used for another 5 years. This can be now sold for $70,000 but the removal and cleanup cost will amount to $20,000.

The new equipment would cost $115,000 and an installation cost of $10,000. To support the increased business resulting from the purchase of the new equipment, ITC estimated the following increase in its current assets. Accounts receivables by $40,000, inventories by 30,000 and accounts payable by $50,000. At the End of year 5, the value of the old machinery would be zero. The new equipment can be sold to net $30,000. These equipment are considered class 8 asset with a CCA rate of 20%.

The estimated operating income for both the equipment is shown below.

Year	New Equipment	Old Machinery
1	$45,000.00	$25,000.00
2	$45,000.00	$23,000.00
3	$45,000.00	$23,000.00
4	$45,000.00	$20,000.00
5	$45,000.00	$20,000.00

The cost of capital for ITL is 12% and has a tax rate of 40% Approval of project depends on the following: NPV should be positive. IRR is at lest 20%; Profitability index is at least 1.25

Required:

A) Calculate the Net Present Value (NPV of this proposal )

B) What is the implicit Internal Rate of Return for ITL?

C) Should ITL acquire the new equipment ? Explain your conclusion