A,Your buddy in mechanical engineering has invented a money machine. The main drawback of the machine is that it is slow. It takes one year to manufacture $1300. However, once built, the machine will last forever and will require no maintenance. The machine takes one year to build and it will cost $26000 to build. Your buddy wants to know if he should invest the money to construct it. If the interest rate is 4.0% per year, what should your buddy do?

A1, Calculate the NPV of the machine?

B, Your buddy has found a way to improve the machine. Everything else equal as in (a), the amount of produced money will increase every year by 1%. Calculate the NPV for this improved machine.? Calculate the NPV for this improved machine.

C Your buddy is interested to know the IRR for (b) WHAT IS the IRR of the machine ?