a-) Calculate the Net Present Value(NPV)

b-)Recalculate FCA's NPV assuming the cost of capital is 6 percent.

PROBLEM#2

Beacon Company is considering automating its production facility. The initial investment in automation would be $15 million, and the equipment has a useful life of 10 years with a residual value of $500,000. The company will use straight-line depreciation. Beacon could expect a production increase of 40,000 units per year and a reduction of 20 percent in the labor cost per unit.

a-)Using a discount rate of 15 percent, calculate the net present value (NPV) of the proposed investment.

b-)Recalculate the NPV using a 10% discount rate.