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Sampson Corp buys equipment for $95,000

/in /by

Sampson Corp buys equipment for $95,000 that will last for 7 years. The equipment

will generate cash flows of $22,000 per year and will have no salvage value at the end of its life. Ignore taxes. Use 16% required rate of return.

(a) What is the present value (PV) of this investment at 16%?

(b) What is the net present value (NPV) of this investment? Should Sampson 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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