Amaro Hospital, a not-for-profit institution not subject to income taxes, is considering the purchase of new equipment

Question:

Amaro Hospital, a not-for-profit institution not subject to income taxes, is considering the purchase of new equipment costing $20,000 to achieve cash savings of $5,000 per year in operating costs. The estimated useful life is 10 years, with no terminal value. Amaro’s minimum is 14%.

REQUIRED
A. What is the of this investment?
B. What is the internal rate of return?
C. What is the accrual accounting rate of return based on the initial investment?
D. What is the payback period?

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