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A firm is considering purchase of a new machine that will cost $100,000 and generate after-tax cash inflows of $35,000 for 4 years. The benchmark
A firm is considering purchase of a new machine that will cost $100,000 and generate after-tax cash inflows of $35,000 for 4 years. The benchmark discount rate is 12% and the benchmark payback period is 2 years. A. What is the NPV of this project? Do you recommend that the firm buy the machine based on your answer? Explain why or why not. B. What is the IRR of this project? Based on your answer, and considering your answer to part A above, do you recommend that the firm buy the machine? Explain why or why not. C. What is the payback of this project? Based on your answer, and considering your answer to parts A & B above, do you recommend that the firm buy the machine? Explain why or why not
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