Part I

Lee Company is considering the purchase of equipment that would allow the company to add a new porduct to its line. The equipment is expected to cost 800000 with a 5 year useful life and a 200000 salvage value. It will be depreciated on a straight line basis. The company anticipates the following after tax net income from the new product. Year 1 100000 Year 2 150000 Year 3 70000 Year 4 60000 Year 5 30000. The company has established the following required rates of return for investments based on their cost. investment cost 400000 4%, 500000 5%, 600000 6%, 700000 7%, 800000 8%, 900000 9%, 1000000 10%. Set up an excel spreadsheet that calculates the NPV of this equipment. First compute depreciation, then compute the after tax net cash inflows for each year. Then compute the npv for any parameter change.

Part II

Assume the same facts as before except now the machine is anticipated to last 7 years and produce a 20000 after tax net income in year 6 and a 10000 after tax net income in year 7. also the company now uses the double declining balance depreciation method. using the same approach as above with only the aftermentioned modifications, calculate the npv.