Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of

$110,000

and will generate net cash inflows of

$19,000

per year for

11

years.

a.What is the project's NPV using a discount rate of

11

percent?

Should the project be accepted? Why or why not?

b.What is the project's NPV using a discount rate of

14

percent? Should the project be accepted? Why or why not?

c.What is this project's internal rate of return? Should the project be accepted? Why or why not?

Question content area bottom

Part 1

a.If the discount rate is

11

percent, then the project's NPV is

$7,9247,924.

(Round to the nearest dollar.)

Part 2

The project

should be

accepted because the NPV is

positive

and therefore

adds

value to the firm.(Select from the drop-down menus.)

Part 3

b.If the discount rate is

14

percent, then the project's NPV is

$