A long-term project you are currently working on, as a project manager, will be completed in 9 years. One of the site supervisors approaches you with idea of buying a bigger compacting machine. After some analysis, you identify that you can save five (5) workers' wages to a value of R145 000 per annum for the next five years if you replace the workers with the mentioned machine. The machine costs R450 000 and you can sell it for R25 000 at the end of 5 year period. The company required rate of return is 15%. a. Determine and interpret the net present value (NPV) of the project (6) b. Determine and interpret the internal rate of return (IRR) for the project (7) c. If the NPV of this proposed idea is R0 based on a required rate of return of 15%, would you recommend the company to go-ahead with the decision?

Answer rating: 100% (QA)

To determine the net present value NPV and internal rate of return IRR for the project we need to calculate the present value PV of cash flows and com... View the full answer