A machine costs $300,000 right now and an extra $80,000 a year from now, and is...

  

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A machine costs $300,000 right now and an extra $80,000 a year from now, and is expected to produce the following cash flows: Year Cash flow ($ thousand) Year Cash flow ($ thousand) $ $ Your cost of capital is 8%/year. a. What is the project's PB (payback period)? b. What is the project's NPV? 1 50 $ 6 92 $ 2 57 $ 7 92 $ 3 75 $ 80 $ 85 (continue on next page) 8 4 80 $ 9 68 $ 5 10 50 (5 points) (15 points) c. What is the project's IRR? d. Using NPV, what is your investment decision? e. Using IRR, what is your investment decision? A machine costs $300,000 right now and an extra $80,000 a year from now, and is expected to produce the following cash flows: Year Cash flow ($ thousand) Year Cash flow ($ thousand) $ $ Your cost of capital is 8%/year. a. What is the project's PB (payback period)? b. What is the project's NPV? 1 50 $ 6 92 $ 2 57 $ 7 92 $ 3 75 $ 80 $ 85 (continue on next page) 8 4 80 $ 9 68 $ 5 10 50 (5 points) (15 points) c. What is the project's IRR? d. Using NPV, what is your investment decision? e. Using IRR, what is your investment decision?

Answer rating: 100% (QA)

Answer Solution A Payback Period Payback period means the time by which the Project is able to recov... View the full answer