Question: GHI Enterprises is considering purchasing a new software system that costs $120,000. The software has a useful life of 5 years and will provide annual

GHI Enterprises is considering purchasing a new software system that costs $120,000. The software has a useful life of 5 years and will provide annual cost savings of $35,000. The company’s required rate of return is 14%.

Requirements:

Calculate the payback period.
Calculate the NPV.
Calculate the IRR.
Determine the ARR.
Advise whether GHI Enterprises should proceed with the investment.

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