Consumer Glass would like to increase the capacity of its production. After a lot of research and

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Question:

Consumer Glass would like to increase the capacity of its production. After a lot of research and analysis, they decided to invest in new equipment. The new equipment costs $50,000. Consumer Glass will get a loan from the bank. The discounted rate is 5% per year.

They predict the benefit of having new equipment is as follows:

Year 1

$9,000

Year 2

$9,000

Year 3

$7,000

Year 4

$6,000

Calculate the NPV. Is it a good investment?

Q.1.2.

You invest 5,000 for 5 years at 8% compounded yearly. How much money will you have?

Calculate the total interest on your investment.

Question 2.

Calculate the internal rate of return of an investment manually and with a financial calculator.

Q.2.1.

Kevin has a manufacturing company. He wants to increase the profit by investing in a new machine that has savings as follows:

Yr. 1 $105,000

Yr. 2 $95,000

Yr. 3 $90,000

The new machine costs $250,000. The cost of capital is 15%. Does it make sense to invest in the new machine? Calculate IRR using the excel spreadsheet, and also, using your calculator.

Question 3.

Calculate the payback period of an investment.

Q.3.1.

Shantel is thinking about opening a shop. She needs to invest $60,000. She predicts that the shop will get $15,000 yearly.

Calculate the payback period.

Q.3.2.

Calculate the payback period of an investment.David would like to invest in a project that required $100,000. He will get yearly savings of $20,000.

Calculate the payback period.