H1.Account Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a newproduct to its computer furniture line. The equipment is expected to cost $399,360 and to have a six-year life and nosalvage value. The equipment is expected to generate income of $16,239 and net cash flow of $83,785 in each year of itssix-year life. Santana requires an 8% return on all investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Useappropriate factor(s) from the tables provided.) (Negative net present values should be indicated with a minus sign. Donot round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearestwhole number.)Required:1-a. Compute the payback period for this equipment.1-b. Compute the net present value for this equipment.1-c. Compute internal rate of return for this equipment.2. If Santana requires investments to have payback periods of four years or less, should she invest in this equipment?3. If Santana requires investments to have at least an 8% internal rate of return, should she invest in this equipment?Complete this question by entering your answers in the tabs below.Req 1AInitial investment$Req 1BCompute the payback period for this equipment.Numerator:Req 1AShow Transcribed TextReq 1CYears 1-6Initial investmentNet present valueReq 1BIReq 2 and 3Payback Period399,360 $/Annual net cash flowDenominator:< Req 1AComplete this question by entering your answers in the tabs below.$Req 1C Req 2 and 3Compute the net present value for this equipment. (Negative values must be entered as a negative number.)Net CashFlowsPresent Value ofAnnuity at 8%Present Value of NetCash FlowsX=83,785 =83,785 xPayback period4.77 years< Req 1AReq 1B >==$$Req 1C >0399,36025,676 Complete this question by entering your answers in the tabs below.Req 1AReq 1BNumerator:Compute internal rate of return for this equipment.Show Transcribed TextReq 1CPresent Value Factor1Denominator:Initial investment1399,360 1Annual net cash flowS$83,785 =Find this factor on the appropriate table to estimate the Internal Rate of ReturnPeriods (p) =Internal Rate of ReturnReq 1AReq 2 and 310 %Req 1BĴ< Req 1BsPresent Value Factor4.7665Complete this question by entering your answers in the tabs below.Req 2 and 3>Req 1C Req 2 and 32. If Santana requires investments to have payback periods of four years or less, should she invest in this equipment?3. If Santana requires investments to have at least an 8% internal rate of return, should she invest in this equipment?2. If Santana requires investments to have payback periods of four years or less, should she invest in this equipment?3. If Santana requires investments to have at least an 8% internal rate of return, should she invest in this equipment?< Req 1CReq 2 and 3>Do not investDo not invest

Payback Period:- Payback period is a financial metric used to evaluate the time it takes for an…

Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its computer furniture line. The equipment is expected to cost $399,360 and to have a six-year life and no salvage value. The equipment is expected to generate income of $16,239 and net cash flow of $83,785 in each year of its six-year life. Santana requires an 8% return on all investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) (Negative net present values should be indicated with a minus sign. Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole number.) Required: 1-a. Compute the payback period for this equipment. 1-b. Compute the net present value for this equipment. 1-c. Compute internal rate of return for this equipment. 2. If Santana requires investments to have payback periods of four years or less, should she invest in this equipment? 3. If Santana requires investments to have at least an 8% internal rate of return, should she invest in this equipment?

Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its computer furniture line. The equipment is expected to cost $399,360 and to have a six-year life and no salvage value. The equipment is expected to generate income of $16,239 and net cash flow of $83,785 in each year of its six-year life. Santana requires an 8% return on all investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) (Negative net present values should be indicated with a minus sign. Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole number.) Required: 1-a. Compute the payback period for this equipment. 1-b. Compute the net present value for this equipment. 1-c. Compute internal rate of return for this equipment. 2. If Santana requires investments to have payback periods of four years or less, should she invest in this equipment? 3. If Santana requires investments to have at least an 8% internal rate of return, should she invest in this equipment?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

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