Laguna Art Ceramic Ltd produces and sells art ceramics. The manager of the company estimates that the company can save $14,000 a year in cash operating costs for the next 7 years if the company buys a new Ceramic Stove Burner at a cost of $65,000. No terminal disposal value is expected. The required rate of return is 6%. Assume all cash flows occur at year‐end except for initial investment amount.

Required:

Calculate the following for the new Ceramic Stove Burner:

(a) Net Present Value (NPV)

(b) Payback Period

(c) Internal Rate of Return (IRR)

Present Value of a series of $1 Cash Flows

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24% Periods 4% 6% 0.943 1.833 2.673 2.577 2.487 2.402 2.322 2.246 2.174 2.106 2.042 1.981 3.465 8% 10% 12% 14% 16% 18% 20% 22% 26% 0.909 0.893 0.877 0.862 0.847 0.833 0.820 0.806 0.794 0.926 0.962 1.886 2.775 1.647 1.605 1.457 1.424 1.923 2.589 2.494 2.404 2.320 2.991 2.864 2.745 2.635 3.167 3.020 2.885 1.783 1.736 1.690 1.566 1.528 1.492 3 4 3.630 3.312 3.170 3.037 2.914 2.798 3.433 3.889 2.690 3.791 3.605 4.452 4.212 3.993 3.274 3.127 3.685 3.498 5.242 4.917 4.623 4.355 4.111 4.868 4.564 3.326 3.605 4.288 3.812 6.002 5.582 5.206 4.039 3.416 3.242 3.083 6.210 5.747 4.078 3.837 3.619 3.421 3.241 3.786 3.566 3.366 6.733 7.435 6.802 6.247 8.111 5.335 4.968 4.639 4.344 9. 5.759 5.328 4.946 4.607 4.303 4.031 7.360 6.710 6.145 10 5.650 5.216 4.833 4.494 4.192 3.923 3.682 3.465