Problem 2 (25 points). Beethoven Company is considering the purchase of a piece of equipment with a cost of $1,400,000. The equipment is expected to have a useful life of ten years with a salvage value of $100,000 at the end of that time. The company expects to have the following cash revenues and expenses from the equipment over its life. The company will use the straight line depreciation method for depreciating the equipment. The company has an effective tax rate of 30%. Management wants all projects to earn a minimum rate of return of 11% on an after tax basis and all projects to pay back their initial investment on an after tax basis in 6.0 years or less. REQUIRED: (1) Compute the following items for this project on an after tax basis. Be sure to show all appropriate supporting computations. (a) Accounting rate of return on average investment. Round your answer to two decimal places for the percentage (four decimal places in all). (b) Cash payback period. Round your answer to two decimal places. Net present value. Round your answer to the nearest whole dollar. Should the company invest in the equipment? Explain your answer. (C) (2) Year 2 3 4 5 6 7 8 9 10 BEETHOVEN COMPANY DATA FOR CAPITAL BUDGETING ANALYSIS Cash Revenues Cash Expenses 600,000 $ 460,000 650,000 490,000 750,000 620,000 800,000 670,000 800,000 720,000 850,000 710,000 850,000 720,000 900,000 720,000 950,000 680,000 800,000 650,000