NPV; PI; payback; IRR Pete's Paving provides custom paving of sidewalks and driveways. One of the most labor-intensive aspects of the paving operation is preparing and mixing materials. Sharon Guillon, corporate engineer, has found new computerized equipment to mix (and monitor the mixing of) materials. According to information received by Guillon, the equipment's cost is $580,000 and has an expected life of eight years. If purchased, the new equipment would replace manually operated equipment. Data relating to the existing and replacement mixing equipment follow. Existing Equipment Original cost $56,000 Present book value $32,000 Annual cash operating costs $150,000 Fair value $12,000 Fair value in eight years Remaining useful life $0 8 years Replacement Equipment Cost $580,000 Annual cash operating costs Fair value in eight years Useful life $30,000 $0 8 years a. Assume that the company's cost of capital is 10 percent, which is to be used in discounted cash flow analysis. (1) Compute the net present value of investing in the new equipment, ignoring taxes. Note: Round your answer to the nearest whole dollar. $ (2) Compute the profitability index of investing in the new equipment, ignoring taxes. Note: Round your answer to one decimal place (i.e. round 4.3555 to 4.4). b. Should Pete's Paving purchase the machine based on your answers to part (a)? c. Compute the payback period for the investment in the new equipment. (Ignore taxes.) Note: Round your answer to one decimal place (i.e. round 4.3555 to 4.4). years % 4 d. Rounding to the nearest whole percentage, compute the internal rate of return for the equipment investment.