Ali Baba Tours is considering an investment in augmented reality (AR) technology to boost its tourism revenues The system sells for $24,586 and requires additional working capital of $4,000 its estimated useful life is five years and will have a salvage value of $1,000 in year 3, a system upgrade will also be required at a cost of $6,000, Annual incremental revenues from the purchase of the system will be $10,000 but a loss of $3,000 in contribution margin of traditional tours is also expected Incremental fixed costs associated with the system total $3,200 including depreciation of $1,400.

Required: 

a Compute the net present value at a 14% required rate of return 

b. Compute the internal rate of return. 

C Determine the payback period of the investment 

d. NPV is argued to be the superior capital budgeting technique. Critically evaluate the argument.

Answer rating: 100% (QA)

Computing the NPV and IRR for the project Sr No Particulars Years 0 1 2 3 4 5 1 Initial cost of the ... View the full answer