Question 1: Evaluating investment projects You are planning to invest $50,000 in new equipment. This investment will generale net cash flow of $10,000 a year for the next years. The severe the cost of capital is 25% a year a) Compute the net present value NPV = $ Enter negative numbers with a mission 100 not (100) or (100) Should you invest? Why? YES -- the NPV is positive, which indicates that the investment is profitable YES the legative, which indicates that the investment will reduce costs NO the way is negative, which indicates that the investment is unprofitable b) Compute the payback period payback period Yes c) Compute the accounting rate of return (AR). To compute At first computer annual deprecations annual income average investments ARR your answer is to entero without the percent on d) Which of the three methods in (a)-(c) should you usele realitet PV payback muthod oly ARR only M 404 OYES -- the NPV is negative, which indicates that the investment with reduce costs O NO -- the NPV is negative, which indicates that the investment is unprofitable b) Compute the payback period. payback period years c) Compute the accounting rate of return (ARR). To compute ARR first compute annual depreciations annual incomes average Investments ARR If your answer 109, enter 10 without the percent sign. d) Which of the three methods in (a) (c) should you use in real life? O NPV only payback method only ARR only alyays use all three methods to reach the best decision