Calculate NPV—compare to IRR Sunbelt Manufacturing Ltd. is considering the investment of $95,000 in a new machine. The machine will generate cash flow of $21,000 per year for each year of its six-year life and will have a salvage value of $14,000 at the end of its life. The company’s cost of capital is 12%.

Required:

a. Calculate the net present value of the proposed investment. (Ignore income ' taxes.)

b. What will the internal rate of return on this investment be relative to the cost of capital? Explain your answer.