Question

The Green Goddess Company is considering the purchase of a new machine that would increase the speed of manufacturing tires and save money. The net cost of the new machine is $55,000. The annual cash flows have the following projections. (Use a Financial calculator to arrive at the answers.) Year 1 2 3 UWN Cash Flow $29,000 27,000 27,000 32,000 10,000 a. If the cost of capital is 9 percent, what is the NPV? (Round the final answer to the nearest whole dollar.) NPV $ b. What is the IRR? (Round the final answer to 2 decimal places.) IRR % c. Should the project be accepted? Yes No

Answer 1

a) Using financial calcu calculator, fo= - 55000 col = 29000 foi=1 CO2 = 270oO fo2= 2 CO3 = 32000 fo3 = 1 Co4 = 10000 Fo 4 = 1 NPV I = 9 Enter J, CPT = $ 44348.74 $ 44348.74 Answer. = $ 44349 NPV- b) using financial calculator, cfo = - 55000 col= 29000 fol= co2= 270oo fo2 = 2 CO3 = 32000 103 = 1 cou=1000 o fou = 1 IRR - CPT = 39.44 39.44 of Answer. . IRR = c) Yes, the project should be accepted because Mpy is positive.