Cowboy Recording Studio is considering the investment of $138,600 in a new recording equipment. It is...

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Cowboy Recording Studio is considering the investment of $138,600 in a new recording equipment. It is estimated that the new equipment will generate additional cash flow of $20,500 per year for each year of its 7-year life and will have a salvage value of $14,500 at the end of its life. Cowboy's financial managers estimate that the firm's cost of capital is 8%. Use Table 6-4 and Table 6-5. Note: Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals. Required: a. Calculate the net present value of the investment. b. Calculate the present value ratio of the investment. c. What is the internal rate of return of this investment, relative to the cost of capital? d. Calculate the payback period of the investment. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Calculate the net present value of the investment. Note: Negative amount should be indicated by a minus sign. Do not round intermediate c rounded to the nearest whole dollar amount. Net present value Cowboy Recording Studio is considering the investment of $138,600 in a new recording equipment. It is estimated that the new equipment will generate additional cash flow of $20,500 per year for each year of its 7-year life and will have a salvage value of $14,500 at the end of its life. Cowboy's financial managers estimate that the firm's cost of capital is 8%. Use Table 6-4 and Table 6-5. Note: Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals. Required: a. Calculate the net present value of the investment. b. Calculate the present value ratio of the investment. c. What is the internal rate of return of this investment, relative to the cost of capital? d. Calculate the payback period of the investment. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Calculate the net present value of the investment. Note: Negative amount should be indicated by a minus sign. Do not round intermediate c rounded to the nearest whole dollar amount. Net present value

Answer rating: 100% (QA)

To calculate the net present value NPV of the investment we need to discount the cash flows generate... View the full answer