• You are planning to invest $25,000 in new equipment. This investment will generate net cash flows of $15,000 a year for the next 2 years. The salvage value after 2 years is zero. The cost of capital is 25% a year.
  
  a) Compute the net present value. Should you invest? Why?
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  b) Compute the payback period.
  
  c) Compute the accounting rate of return (ARR).
  
  d) Which of the three methods in (a)-(c) should you use in real life?
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The detailed answer for the above question is provided below a Net present value NPV The NPV is the sum of the present values of all future cash flows ... View the full answer