The Henry Co. is considering the acquisition of a new, labor-saving machine for its factory. The capitalized cost of the machine is $1,000,000. ..

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The Henry Co. is considering the acquisition of a new, labor-saving machine for its factory. The capitalized cost of the machine is $1,000,000. ..

 

The Henry Co. is considering the acquisition of a new, labor-saving machine for its factory.  The capitalized cost of the machine is $1,000,000.  The machine will provide positive cash flows of $152,000 per year for ten years.  The company”s required rate of return is 8%.  What is the NPV of this project?

 

 

 

Part Two

The Acme Co. is considering the acquisition of a product from the Wiley Coyote Co.  The product is projected to have a seven-year product life cycle and provide the following cash flows:

Year one:  $23,000

Year two:  $28,000

Year three:  $30,000

Year four:  $28,000

Year five:  $22,000

Year six:  $20,000

Year seven:  $15,000

The product will cost Acme $125,000 and the company has a 9% WACC.  What is the IRR on this project?