Question: Your buddy in mechanical engineering has invented a money machine. The main drawback of the machine is that it is slow. It takes one year

Your buddy in mechanical engineering has invented a money machine. The main drawback of the machine is that it is slow. It takes one year to manufacture 90. However, once built, the machine will last forever and will require no maintenance. The machine takes one year to build and it will cost $1,000 to build. Your buddy wants to know if he should invest the money to construct it. If the interest rate is 5% per year, what should your buddy do?

a. To make the decision you need to calculate the net present value (NPV) of the machine.

The NPV of the machine is_____ $. (round to the nearest dollar, if negativ use -)

b. You convince your friend to improve the machine so that the amount of produced money will increase every year by 1%.

The NPV of the new machine is_______ $. (round to the nearest dollar, if negativ use -)

c. What is the IRR of the machine in b.?

The IRR of the machine is ________$%. (round to two decimals)

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