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Question: Tables: Cowboy Recording Studio is considering the investment of $140,000 in a new recording equipment. It is estimated that the new equipment will generate
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Tables:
Cowboy Recording Studio is considering the investment of $140,000 in a new recording equipment. It is estimated that the new equipment will generate additional cash flow of $20,500 per year for each year of its 8-year life and will have a salvage value of $13,000 at the end of its life. Cowboys's financial managers estimate that the firm's cost or capital is 10%. Use Table 6-4 and Table 6-5. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.) Required a. Calculate the net present value of the investment. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.) Net present value f b. Calculate the present value ratio of the investment. (Round your answer to 2 decimal places.) resent value rat c. What is the internal rate of return of this investment, relative to the cost of capital? e internal rate of return of this investment is the cost of capital of 10%. d. Calculate the payback period of the investment. (Do not round intermediate calculations. Round your answer to 2 decimal places.) aybackStep by Step Solution
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