Moosehead Community Centre, a not-for-profit organization not subject to income taxes is considering the purchase of a new snowplow costing $20,000. The estimated useful life is eight years, with no salvage value. Mooseheads minimum expected return is 12%, and it has a four-year guideline when evaluating an investment project. Moosehead uses straight-line amortization. The manager estimates the following saving in cash operating costs: Year Amount 1 $5,200 2 $4,800 3 $4,400 4 $3,600 5 $3,200 6 $2,800 7 $2,200 8 $1,800 Total $28,000

a) What is the net present value of this investment?

b) What is the internal rate of return of this initial investment?

c) What is the simple rate of return? Use the average of the annual savings when calculating the simple rate of return.

d) What is the payback period?

e) Based on the financial evaluation, would you recommend the investment? Provide support for your position.

Moosehead Community Centre, a not-for-profit organization not subject to income taxes is considering the purchase of a new snowplow costing $20,000. The estimated useful life is eight years, with no salvage value. Moosehead's minimum expected return is 12%, and it has a four-year guideline when evaluating an investment project. Moosehead uses straight-line amortization. The manager estimates the following saving in cash operating costs: Year Amount $5,200 $4,800 $4,400 $3,600 $3,200 $2,800 $2,200 $1,800 Total $28,000 00 vou A WN