Our Business has the Option to Purchase Some New Equipment for the Business.

• The Cost to Purchase the Equipment will be $100,000 Now and it will last for 7 Years.

• The Equipment will help to Increase Revenues for a Net Cash Inflow of $21,000 Annually

• The Equipment Can Be Sold at the End of 7 Years for $33,000

• The Cost of Capital is 15%, Ignore Income Taxes

QUESTIONS

1. Compute the Total Net Present Value (Cost) or Benefit to Buy the New Equipment = Input your Answer as a Number Only to the Nearest Dollar, No Commas, Decimals, or Dollar Signs. Show a Negative Number in Parens, Example = -150 = (150).

2. Compute the Net Cash Flow for this Capital Project =Ignore Time Value of Money? Input your Answer as a Number Only to the Nearest Dollar, No Commas, Decimals, or Dollar Signs. Show a Negative Number in Parens, Example = -150 = (150).

3. Compute the Profitability Index for this Project = Input your Answer as a Percent Rounded out 2 Decimal Places. Example= 12.34 The Profitability Index Formula = NPV of Cash Inflows+Outflows / Initial Investment.

4. Which Rate is Greater on this Investment IRR or COC? = . Input your Answer as either IRR or COC

5. How Do you know the Answer to the Question Above? =Input your Answer with one of the Following; IRR>0 or IRR<0 or coc>0 or COC<0 or npv>0 or NPV<0

6. Should We Buy the New Equipment ? = Input your answer with either YES or NO.

7. How Do you know the Answer to the Question Above? =Input your Answer with One of the Following; IRR>0 or IRR<0 or coc>0 or COC<0 or npv>0 or NPV<0 or irr>COC or COC>IRR