B

$C$

D

E

$\backslash$table$[[$G$,$H$,$I,J$,$K$,$L$,$M$,$N$]]$

Project Two Problem $-$ Capital Budgeting Problem

is $$3,500,000.$ The equipment will last an estimated six years with no expected salvage value.

The expected incremental after$-$tax cash flows are presented below in the table. The relevant cost of capital is $10\%.$

Hint: You will need to determine the net cash flow for each year before completing the requirements.

Table:

Year $1$

Year $2$

Year $2$

Year $4$

Year $5$

Year $6$

Cash Benefits

Cash Disbursements

$3,200,000$

$3,300,000$

$3,500,000$

$3,600,000$

$3,700,000$

Cost of capital

Requirements:

Compute the net present value $($NPV$)$ the proposed investment by assuming all cash flows occur at year end. Round

the answer to nearest whole dollar.

Compute the internal rate of return $($IRR$)$ for the proposed investment by assuming all cash flows occur at year end.

Round the answer to $2$ decimal places.

Does the result of the NPV calculation indicate acceptance or rejection of the investment?

Provide an explanation for your conclusion:

Does the result of the IRR calculation indicate acceptance or rejection of the investment?

Provide an explanation for your conclusion:

Compute the payback period for the investment $($round to one decimal place$)$: