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Epsilon Enterprises is contemplating the purchase of a new piece of equipment that costs INR...

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Question

Accounting

Epsilon Enterprises is contemplating the purchase of a new piece of equipment that costs INR 300,000. The equipment is expected to produce the following cash flows:

Year

Cash Flows

Initial Investment

(300,000)

1

80,000

2

90,000

3

100,000

4

110,000

Requirements: a. Compute the payback period. b. Calculate the NPV of the investment if the discount rate is 10%. c. Should Epsilon Enterprises proceed with the purchase? Justify your answer using the NPV rule.

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