# Question: Big Steve s a maker of swizzle sticks is considering the

Big Steve’s, a maker of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $ 100,000 and will generate free cash inflows of $ 18,000 per year for 10 years.

a. If the required rate of return is 10 percent, what is the project’s NPV?

b. If the required rate of return is 15 percent, what is the project’s NPV?

c. Would the project be accepted under part (a) or (b)?

d. What is the project’s IRR?

a. If the required rate of return is 10 percent, what is the project’s NPV?

b. If the required rate of return is 15 percent, what is the project’s NPV?

c. Would the project be accepted under part (a) or (b)?

d. What is the project’s IRR?

**View Solution:**## Answer to relevant Questions

Mooby’s is considering building a new theme park. After estimating the future cash flows, but before the project could be evaluated, the economy picked up and with that surge in the economy interest rates rose. That rise ...Calculate the PI given the following cash flows if the appropriate required rate of return is 10%. YEAR CASH FLOWS 0.......... -$ 55,000 1.......... 10,000 2.......... 10,000 3.......... 10,000 4.......... ...Sheinhardt Wig Company is considering a project that has the following cash flows: If the appropriate discount rate is 10 percent, what is the project’s discounted payback? You are considering a project with an initial cash outlay of $ 80,000 and expected free cash flows of $ 20,000 at the end of each year for 6 years. The required rate of return for this project is 10 percent. a. What is the ...In the preceding chapter we examined the payback period capital- budgeting criterion. Often this capital- budgeting criterion is used as a risk- screening device. Explain the rationale behind its use.Post your question