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Melinda Corp buys equipment for $75,000 that will last for 5 years

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Melinda Corp buys equipment for $75,000 that will last for 5 years. The equipment will generate cash flows of

$24,000 per year and will have no salvage value at the end of its life. Ignore taxes. Use 12% required rate of return.

Required

(a) What is the present value (PV) of this investment at 12%? 

(b) What is the net present value (NPV) of this investment? Should Melinda Corp buy the equipment based on NPV? Justify your decision. 

(c) What is the internal rate of return (IRR) of this investment? 

(d) What is the payback period?

 
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