Question 2 DataPoint Engineering is considering the purchase of a new piece of equipment for $250,000 with disposable value of $10,000 at the end of 6th year. The company uses straight-line depreciation. It will require an additional initial investment of $140,000 in non-depreciable working capital. Thirty-five thousand dollars of this investment will be recovered at the end of the sixth year. Income before depreciation and taxes for the next six years will be: Year Amount 1 $185,000 2 160,000 3 130,000 4 115,000 5 95,000 6 85,000 The company tax rate is 30 percent. Industry uses a discount rate of 15%. Required: (a) Determine annual cash flow for the six year period (b) Determine payback period (c) Using the net present value model, decide whether the DataPoint company should purchase the new equipment. (e) Define the internal rate of return (IRR). Is it true that when the IRR method is used in project evaluation the discount rate will not need to be estimated