Audio Partners needs to invest in the next level of technology in order to be competitive. The company is exploring the purchase of a new piece of equipment that will cost $1,500,000, at an expected discount rate of 8%. The equipment is expected to return net cash inflows of $250,000 over the next 10 years.

Please show your work in the Excel template (see below) and provide a thorough explanation to the following questions.

 

• Please use the following link to review the Excel template and to show your work: https://docs.google.com/spreadsheets/d/1d-y3N676Dj9Wiwy_Z1pNx4xC93L8PCOznA0_edrWjyY/edit?usp=sharing

Question:

Based on the above information and using the provided Excel template (https://docs.google.com/spreadsheets/d/1d-y3N676Dj9Wiwy_Z1pNx4xC93L8PCOznA0_edrWjyY/edit?usp=sharing), calculate the following items for this proposed equipment purchase:

2. Net Present Value
4. Internal Rate of Return
6. Payback Period

• Would you recommend the company invest in this equipment? Why or why not?
• Explain the importance or significance of the calculations prepared in Part 1 of this assignment. Do not explain how the numbers were calculated, this is what your formulas in Excel will show.
• Recommend whether the equipment should be purchased based solely on the calculations in Part 1.
• Discuss a minimum of three other non-quantitative factors that should be considered when making a capital budgeting decision such as the one in this scenario.

Answer rating: 100% (QA)

Based on the given information we can calculate the Net Present Value NPV Internal Rate of Return IRR and Payback Period for the proposed equipment purchase Net Present Value NPV NPV is calculated as ... View the full answer