Hello tutors! I would really like a little help with this case study! I know it is quite long, so you are free to take all the time that you need!

Thanks in advance to whoever will answer me! Have a great sunday!

A manufacturing company is evaluating two options for new equipment to introduce a new product to its suite of goods. The details for each option are provided below:

Option 1

• $65,000 for equipment with useful life of 7 years and no salvage value.
• Maintenance costs are expected to be $2,700 per year and increase by 3% in Year 6 and remain at that rate.
• Materials in Year 1 are estimated to be $15,000 but remain constant at $10,000 per year for the remaining years.
• Labor is estimated to start at $70,000 in Year 1, increasing by 3% each year after.

Revenues are estimated to be:

Year 1 /Year 2/ Year 3/ Year 4/ Year 5/ Year 6/ Year 7-

(-) / 75,000/ 100,000/125,000/150,000/150,000/150,000

Option 2

• $85,000 for equipment with useful life of 7 years and a $13,000 salvage value
• Maintenance costs are expected to be $3,500 per year and increase by 3% in Year 6 and remain at that rate.
• Materials in Year 1 are estimated to be $20,000 but remain constant at $15,000 per year for the remaining years.
• Labor is estimated to start at $60,000 in Year 1, increasing by 3% each year after.

Revenues are estimated to be:

Year 1/ Year 2/ Year 3/ Year 4/ Year 5/ Year 6/ Year 7-

(-)/ 80,000/95,000/130,000/140,000/150,000/160,000

The company's required rate of return and cost of capital is 8%.

Management has turned to its finance and accounting department to perform analyses and make a recommendation on which option to choose. They have requested that the three main capital budgeting calculations be done: NPV, IRR, and Payback Period for each option.

I need help with the calculations and the explanation of them. Plus, could you tell which is the best option for the company??