8-39. Dunn Manufacturing Company is considering the purchase of a factory that makes valves. These valves would be used by Dunn to manufacture water pumps. The purchase would require an initial outlay of $1,564,800. The factory would have an estimated life of 8-66 Chapter 8: The Capital Budget: Evaluating Capital Expenditures 10 years and no residual value. Currently, the company buys 500,000 valves per year at a cost of $1.50 each. If the factory were purchased, the valves could be manufactured for S0.90 each. REQUIRED: Determine the net present value of the proposed project and whether it should be accepted under each of the following assumptions. a. I. The cost of capital is 12% 2. The cost of capital is 14% 3. The cost of capital is 16% b. Determine the profitability index under each of the following assumptions. cost of capital is 1 I. The 2% 2. The cost of capital is 14% 3. The cost of capital is 16% Determine the internal rate of return of the proposed project and indicate whether it should be accepted under each of the following assumptions. c. I. The cost of capital is 12% 2. The cost of capital is 14% 3. The cost of capital is 16%