Background:

Ace Manufacturing is considering purchasing a new piece of equipment for $450,000. This equipment is expected to last 6 years and be depreciated using the straight-line method to a salvage value of $50,000. It will also require an additional investment of $60,000 in working capital. The company's required rate of return is 10%. The following table shows the projected cash flows:

YearCash Flow

1$90,000

2$100,000

3$110,000

4$120,000

5$130,000

6$140,000

Requirements:

1.Calculate the Net Present Value (NPV) of the project.

2.Calculate the Internal Rate of Return (IRR).

3.Determine the Payback Period.

4.Evaluate whether Ace Manufacturing should purchase the equipment based on NPV and IRR.

5.Analyze the impact on the company's working capital.