3. ELO Company is considering the purchase of new equipment that will reduce labor costs. ELO made the following estimates related to the new equipment:


Assume depreciation is calculated on a straight-line basis. All cash flows occur at the end of the year except for the initial investment amounts.

Required:

(1) What is the increase in the annual cash flow from investing the equipment? (8%)
(2) What is the net present value of the project? (8%)
(3) Calculate the accrual accounting rate of return based on average investment. (8%)