Project Valuation and Analysis: Suppose a new machine costs $59,000 today. It will yield $11,000 in after-tax

Question:

Project Valuation and Analysis: Suppose a new machine costs $59,000 today. It will yield $11,000 in after-tax savings each year for 7 years and you sell the machine for $4,000 in the 7th year.

a. Given an opportunity cost of capital of 8%, what is the NPV of this project?

b. What is the IRR of this project?

c. What is the payback period for this project?

d. What is the discounted payback period for this project?

e. What is the profitability index for this project?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...