Calculate each equipment discounted payback period

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Reference no: EM131904137

Consider the following mutually exclusive pieces of equipment that perform the same task. The two alternatives available provide the following set of after-tax net cash flows:

Year Cash Flow(A) Cash Flow(B)

0 -120,000 -120,000

1 23,000 25,000

2 23,000 25,000

3 23,000 25,000

4 32,000 25,000

5 32,000 25,000

6 32,000 25,000

7 25,000

8 25,000

9 25,000

Equipment A has an expected life of three years, whereas equipment B has an expected life of nine years. Assume a required rate of return of 7 percent.

a. Calculate each equipment’s payback period.

b. Calculate each equipment’s discounted payback period.

c. Calculate each equipment’s Net Present Value (NPV).

d. calculate each equipment’s internal rate of return.

Reference no: EM131904137

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