please be clear

Aaron Heath is seeking part-time employment while he attends school. He is considering purchasing technical equipment that will enable him to start a small training services company that will offer tutorial services over the Internet. Aaron expects demand for the service to grow rapidly in the first two years of operation as customers learn about the availability of the Internet assistance. Thereafter, he expects demand to stabilize. The following table presents the expected cash flows: Year of Operation Cash Inflow Cash Outflow 2019 $13,900 $ 8,800 2820 19,700 11,200 2821 22, 200 13, 100 2022 22, 200 13,100 In addition to these cash flows, Aaron expects to pay $21,900 for the equipment. He also expects to pay $3,600 for a major overhaul and updating of the equipment at the end of the second year of operation. The equipment is expected to have a $2,000 salvage value and a four year useful life. Aaron desires to earn a rate of return of 8 percent. (PV of $i and PVA of $1 (Use appropriate factor(s) from the tables provided.) Required a. Calculate the net present value of the investment opportunity. (Negative amount should be indicated by a minus sign. Round Intermediate calculations and final answer to 2 decimal places.) b. Indicate whether the investment opportunity is expected to earn a return that is above or below the desired rate of return and whether it should be accepted. a. Net present value b. Will the return be above or below the cost of capital? Should the investment opportunity be accepted? TABLE 1 PRESENT VALUE OF $1 5% n 4% 6% 7% 8% 9% 0.961538 0.952381 0.943396 0.934579 0.925926 0.917431 20.924556 0.907029 0.889996 0.873439 0.857339 0.841680 3 0.888996 0.863838 0.839619 0.816298 0.793832 0.772183 4 0.854804 0.822702 0.792094 0.762895 0.735030 0.708425 5 0.821927 0.783526 0.747258 0.712986 0.680583 0.649931 6 0.790315 0.746215 0.704961 0.666342 0.630170 0.596267 7 0.759918 0.710681 0.665057 0.622750 0.583490 0.547034 8 0.730690 0.676839 0.627412 0.582009 0.540269 0.501866 9 0.702587 0.644609 0.591898 0.543934 0.500249 0.460428 10 0.675564 0.613913 0.558395 0.508349 0.463193 0.422411 11 0.649581 0.584679 0.526788 0.475093 0.428883 0.387533 12 0.624597 0.556837 0.496969 0.444012 0.397114 0.355535 13 0.600574 0.530321 0.468839 0.414964 0.367698 0.326179 14 0.577475 0.505068 0.442301 0.387817 0.340461 0.299246 15 0.555265 0.481017 0.417265 0.362446 0.315242 0.274538 16 0.533908 0.458112 0.393646 0.338735 0.291890 0.251870 17 0.513373 0.436297 0.371364 0.316574 0270269 0.231073 18 0.493628 0.415521 0.350344 0.295864 0.250249 0.211994 19 0.474642 0.395734 0.330513 0.276508 0.231712 0.194490 20 0.456387 0.376889 0.311805 0.258419 0.214548 0.178431 10% 12% 14% 16% 20% 0.909091 0.892857 0.877193 0.862069 0.833333 0.826446 0.797194 0.769468 0.743163 0.694444 0.751315 0.711780 0.674972 0.640658 0.578704 0.683013 0.635518 0.592080 0.552291 0.482253 0.620921 0.567427 0.519369 0.476113 0.401878 0.564474 0.506631 0.455587 0.410442 0.334898 0.513158 0.452349 0.399637 0.353830 0.279082 0.466507 0.403883 0.350559 0.305025 0.232568 0.424098 0.360610 0.307508 0.262953 0.193807 0.385543 0.321973 0.269744 0.226684 0.161506 0.350494 0.287476 0.236617 0.195417 0.134588 0.318631 0.256675 0.207559 0.168463 0.112157 0.289664 0.229174 0.182069 0.145227 0.093464 0.263331 0.204620 0.159710 0.125195 0.077887 0.239392 0.182696 0.140096 0.107927 0.064905 0.217629 0.163122 0.122892 0.093041 0.054088 0.197845 0.145644 0.107800 0.080207 0.045073 0.179859 0.130040 0.094561 0.069144 0.037561 0.163508 0.116107 0.082948 0.059607 0.031301 0.148644 0.103667 0.072762 0.051385 0.026084 TABLE 2 PRESENT VALUE OF AN ANNUITY OF $1 1 n 4% 5% 6% 7% 8% 9% 10% 12% 14% 16% 20% 0.961538 0.952381 0.943396 0.934579 0.925926 0.917431 0.909091 0.892857 0.877193 0.862069 0.833333 2 1.886095 1.859410 1.833393 1.808018 1.783265 1.759111 1735537 1.690051 1.646661 1.605232 1.527778 3 2.775091 2.723248 2.673012 2.624316 2.577097 2.531295 2.486852 2.401831 2.321632 2.245890 2.106481 4 3.629895 3.545951 3.465106 3.387211 3.312127 3.239720 3.169865 3.037349 2.913712 2798181 2.588735 5 4.451822 4.329477 4.212364 4.100197 3.992710 3.889651 3.790787 3.604776 3.433081 3.274294 2.990612 6 5.242137 5.075692 4.917324 4.766540 4.622880 4.485919 4.355261 4.111407 3.888668 3.684736 3.325510 7 6.002055 5.786373 5.582381 5.389289 5.206370 5.032953 4.868419 4.563757 4.288305 4,038565 3.604592 6.732745 6.463213 6.209794 5.971299 5.746639 5.534819 5.334926 4.967640 4.638864 4.343591 3.837160 9 7.435332 7.107822 6.801692 6.515232 6.246888 5.995247 5.759024 5.328250 4.946372 4.606544 4.030967 10 8.110896 7721735 7.360087 7023582 6.710081 6.417658 6.144567 5.650223 5.216116 4.833227 4.192472 11 8.760477 8.306414 7886875 7.498674 7138964 6.805191 6.495061 5.937699 5.452733 5.028644 4.327060 12 9.385074 8.863252 8.383844 7942686 7536078 7160725 6.813692 6.194374 5.660292 5.197107 4.439217 13 9.985648 9.393573 8.852683 8.357651 7903776 7.486904 7103356 6.423548 5.842362 5.342334 4532681 14 10.563123 9.898641 9.294984 8.745468 8244237 7786150 7366687 6.628168 6.002072 5.467529 4.610567 15 11.118387 10.379658 9.712249 9.107914 8.559479 8.060688 7606080 6.810864 6.142168 5.575456 4.675473 16 11.652296 10.837770 10.105895 9.446649 8.851369 8.312558 7823709 6.973986 6.265060 5.668497 4.729561 17 12165669 11274066 10.477260 9.763223 9121638 8.543631 8.021553 7119630 6.372859 5.748704 4.774634 18 12.659297 11689587 10.827603 10.059087 9.371887 8.755625 8.201412 7249670 6.467420 5.817848 4,812195 19 13.133939 4.843496 5.877455 12.085321 8.905115 8.364920 11.158116 10335595 9603599 7.365777 6.550369 20 13.590326 12.462210 11.469921 10.594014 9.818147 9.128546 8.513564 7.469444 6.623131 5.928841 4.869580