Question
A company is considering purchasing a new machine for $50,000 that is expected to generate net cash flows of $15,000 per year for the next
A company is considering purchasing a new machine for $50,000 that is expected to generate net cash flows of $15,000 per year for the next five years. The company's cost of capital is 8%.
a) Calculate the payback period of the investment.
b) Calculate the internal rate of return (IRR) of the investment.
c) Based on the payback period and IRR, should the company make the investment?
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
10th Canadian edition
1259261018, 1259261015, 978-1259024979
