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Aaron Heath is seeking part-time employment while he attends school

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Aaron Heath is seeking part-time employment while he attends school. He is considering purchasing technical equipment that will enable him to start a small training services company that will offer tutorial services over the Internet. Aaron expects demand for the service to grow rapidly in the first two years of operation as customers learn about the availability of the Internet assistance. Thereafter, he expects demand to stabilize. The following table presents the expected cash flows: Year of Operation Year 1 Year 2 Year 3 Year 4 Cash Inflow $14,100 19,100 23,000 23,000 Cash Outflow $ 8,600 11,300 13,400 13,400 In addition to these cash flows, Aaron expects to pay $20,100 for the equipment. He also expects to pay $3,400 for a major overhaul and updating of the equipment at the end of the second year of operation. The equipment is expected to have a $1,200 salvage value and a four year useful life. Aaron desires to earn a rate of return of 12 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Calculate the net present value of the investment opportunity. (Negative amount should be indicated by a minus sign. Round intermediate calculations and final answer to 2 decimal places.) b. Indicate whether the investment opportunity is expected to earn a return that is above or below the desired rate of return and whether it should be accepted. a. Net present value b. Will the return be above or below the cost of capital? Should the investment opportunity be accepted? Perez Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used 2 airplanes. The first airplane is expected to cost $13,250,000; it will enable the company to increase its annual cash inflow by $5,300,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $29,120,000; it will enable the company to increase annual cash flow by $9,100,000 per year. This plane has an eight-year useful life and a zero salvage value. Required a. Determine the payback period for each investment alternative and identify the alternative Perez should accept if the decision is based on the payback approach. (Round your answers to 1 decimal place.) Payback Period years a-1. Alternative 1 (First plane) Alternative 2 (Second plane) a-2. Perez should accept years