Custom Cycles is looking at purchasing a new piece of equipment that would allow them to automate part of their production process now done manually. The equipment will cost $$200,000$ and would have a useful life of $10$ years. At the end of year five, the equipment would require a $$10,000$ upgrade to replace major components. The equipment is expected to have a salvage value of $$18,000$ at the end of year ten.

Excluding depreciation, the new machine will have operating costs of $$28,000$ per year. The company uses straight$-$line depreciation for all production equipment. The cost of doing the work manually that the new machine will be able to do completely is $$68,000$ per year. Custom Cycles requires a $12\%$ return on all investments in equipment.

Required:

What net annual cash inflows will be provided by the new equipment?

Net annual cash inflows

$2.$ Compute the new equipment's net present value. Use the incremental cost approach. $($Hint$.$ Use Microsoft Excel to calculate the discount factor$($s$).)($Do not round intermediate calculations and PV factor. Round the final answers to the nearest whole dollar.$)$

Net present value

$3.$ What is the internal rate of return on the new equipment? $($Hint$.$ Use Microsoft Excifil to calculate the discount factor$($s$).)$

internal rate of return

$\%$