National Rodeo Association, a not-for-profit organization, isconsidering purchasing a new enterprise software system for$75,000. This investment is projected to have an seven-year usefullife, and a salvage value of $10,000; the investment is projectedto save the organization approximately $14,000 each year inoperating costs. In addition to the cost of the software system,the association needs an increase of $6,000 in net working capital(other than cash) in the first year, which will not be released(that is, converted back to cash) until the end of seven years.
Required:
1. What is the payback period for this proposed investment?(Assume that the cash flows, other than salvage value, occur evenlythroughout the year. Round your answer to 2 decimal places, e.g.,2.452 years = 2.45 years.)
2. If the Association has a required rate of return of 9percent, what is the net present value (NPV) of the proposedinvestment? Round your calculation to whole dollars (i.e., zerodecimal points).
