2. You purchase a machine. It costs $75,000 and will expand cash flow by $1,000 /month in year 1 growing by 2% per year after that. The system will work for 10 years before you have to replace it. What are the NPV (at a 3.3% discount rate) and IRR? The vendor offers you another machine costing $100,000 and lasting 12 years, with the same cash flow gains and a 3% growth rate. What are the NPV and the IRR for it? Should you get it?

File Home Insert Draw Page Layout Formulas Data Review View Help Acrobat Comments Share X Times New Roman 12 - AP = = ! Insert Custom Wrap Text IT AY F LA 2X Delete T Paste B I v A FE Merge & Center $ % ) Conditional Format as Cell Formatting Table Styles Styles Analyze Data Sort & Find & Filter Select Editing Format Cells V Undo Clipboard Font L Alignment Number Analysis c1 Machine 2 A D E F G H I J K L M N B Machine 1 Machine 2 2 Discount rate 3 Growth rate 4 NPV 5 IRR 6 Cash flows: 7 Start 8 Month 1 9 Month 2 10 Month 3 11 Month 4 12 Month 5 13 Month 6 14 Month 7 15 Month 8 16 Month 9 17 Month 10 18 Month 11 19 Month 12 20 Month 13 21 Month 14 Prob. 1 Prob. 2 Prob. 3 Prob. 4 Prob. 5 V. JAN 22 + Ready Extend Selection Display Settings 1259 I O