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Delta Airlines is seeking to purchase a major piece of equipment for $1.5 million. The...

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Delta Airlines is seeking to purchase a major piece of equipment for $1.5 million. The equipment will result in annual cost savings of $600,000 over the next 3 years. The asset will be fully depreciated on a straight-line basis over the next 3 years. Delta then intends to sell the asset at the end of 3 years for $300,000. The equipment purchase is part of a project in which Delta will invest 10% of the equipment's value in net working capital which will be recovered at the end of 3 years Detta intends to finance the purchase of equipment by issuing 100,000 common stocks which are currently priced at $9.75 per share. The company's common stock has a beta of 1.5. The risk-free rate is 4% and the expected return on the market is 11.5%. The remaining financing will be obtained from the issue of 25-year semiannual 8% $1,000 par value bonds that would sell at 105%. The company falls within the 20% tax bracket. Use NPV to advise Delta whether it should acquire the equipment. Your supporting evidence should identify the computations/calculator inputs for: A Year o, Year 1. Year 2, and Year 3 cash flows B. Required rate of return (cost of financing) of the equipment CNPV

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