ABC Corporation has a machine that requires repairs or should be replaced. ABC has evaluated the two options and calculated the cash flows resulting from each option as follows: Option A: Repair the Machine Year Cash Flow

0 -50,000

1 31,500

2 20,100

3 18,900

4 17,100

5 13,700 Option B: Buy a new Machine Year Cash Flow

0. -400,000

1. 91,300

2. 155,000

3. 127,800

4. 126,900

5. 125,100 You have recently been hired by ABC Corporation and your first assignment is to help them decide whichof these two options should be pursued. You would like to apply Capital Budgeting and Time Value ofMoney concepts you have learnt in FIN 301 to analyze the problem and present your recommendationto your boss, Ms. Jane Austen.

Conduct the analysis by calculating the following for each option: 1. Net Present Value (NPV)

2. Internal Rate of Return (IRR)

3. Profitability Index (PI)

4. Payback Period (PB)

5. Crossover Rate

The company has a Weighted Average Cost of Capital (WACC) (discount Rate) of 12%. For this analysis,your boss John Doe asked you to calculate NPV at three different discount rates: 12% (the currentWACC), 14% and 16%.