Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Patz

Question:

Each of the following scenarios is independent. All cash flows are after-tax cash flows.
Required:
1. Patz is considering the purchase of a computer-aided manufacturing system. The cash benefits will be $800,000 per year. The system costs $4,000,000 and will last eight years. Compute the NPV assuming a of 10 percent. Should the company buy the new system?
2. Sterling Wetzel has just invested $270,000 in a restaurant specializing in German food. He expects to receive $43,470 per year for the next eight years. His is 5.5 percent. Compute the internal rate of return. Did Sterling make a good decision?
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