The following data are given for Alright Aluminum Company:
Initial cost of proposed equipment Estimated useful life
Estimated annual savings in cash operating expenses
Predicted residual value at the end of the useful life Cost of capital
$75,000
7 years
$18,000
$ 3,000
12%
Compute the following:
(a) Payback period
(b) Present value of estimated annual savings
(c) Present value of estimated residual value
(d ) Total present value of estimated cash inflows
(e) Net present value (NPV)
(f) Internal rate of return (IRR)