Questions:
1. Determine the annual savings in cash operating costs that would be realized if the supercomputer were purchased.
2. Compute the simple rate of return expected from the supercomputer. Would the supercomputer be purchased if the Computing Solutions required rate of return is 16%?
3. Compute the payback period on the supercomputer. Computing Solutions will not purchase the supercomputer unless it has a payback period of five years or less. Would the supercomputer be purchased in this case?
4. Compute (to the nearest whole percent) the internal rate of return promised by the supercomputer. Based on this computation, does it appear that the simple rate of return is an accurate guide in investment decisions?