The Potash Corporation is considering an investment project for which the following data are available:
Cost of equipment need.............$550,000
Estimated annual net income for 10 years............49,000
Cost of overhaul of equipment needed in 6 years............50,000
Salvage value of equipment in 10 years............70,000
Cost of Capital........................10%
1. How much is annual depreciation?
2. How much is net cash inflow?
3. Calculate NPV and make a decision.
4. Should they invest? Why or why not? What is the most they should pay?