Lenox Hospital, a not for profit entity not subject to income taxes, is considering the purchase of new equipment costing $40,000 to achieve cash savings $10,000 per year in operating costs. The estimated useful life is 10 years, with no residual value. Kaplans minimum expected return is 14 percent.

Present value of $1 annuity over 10 years at 14% per annum = 5.216

Required a) What is the NPV of this investment

b) What is the payback period

c) Name and discuss three possible reasons that the payback period is used to help make capital investment decisions.