USING EXCEL 5. Capital Budgeting (NPV analysis): -- UPS is thinking of purchasing a piece of equipment. The new equipment would be expected to increase operating revenues by$500,000 per year, and increase operating expenses by $150,000 per year. It would cost $1,200,000 and be depreciated using straight-line to a zero salvage value over a depreciable life of 5 years. UPS expects to be able to sell the new equipment for $300,000 after 5 years (assume capital gains tax to be zero). The equipment would require additional net working capital of $60,000 up front, and is expected to generate $30,000 in positive net working capital at the end of the 5 years. UPS's marginal tax rate is 25%. If UPS requires a 16% rate of return on its investments, should it purchase this piece of equipment? Find both the IRR and the NPV.

5. Capital Budgeting(NPV analysis): -- UPS is thinking of purchasing a piece of equipment. The new equipment would be expected to increase operating revenues by $500,000 per year, and increase operating expenses by $150,000 per year. It would cost $1,200,000 and be depreciated using straight-line to a zero salvage value over a depreciable life of 5 years. UPS expects to be able to sell the new equipment for $300,000 after 5 years (assume capital gains tax to be zero). The equipment would require additional net working capital of $60,000 up front, and is expected to generate $30,000 in positive net working capital at the end of the 5 years. UPS's marginal tax rate is 25%. If UPS requires a 16% rate of return on its investments, should it purchase this piece of equipment? Find both the IRR and the NPV