Bricks Company purchased a new machine with acquisition cost of $3.5 million and installation cost of $ 1 million. As a result of acquiring the machine, the expected incremental cash flows before taxes are as follows: 

Year 1  $1,875,000 

Year 2  $ 2,500,000 

Year 3  $ 3,125,000 

Year 4  $ 3,125,000 

Year 5  $ 3,125,000 

 

The expected incremental cash flows are subject to a tax rate of 20%. The company's cost of capital is 10%

 

Compute for the following: 

- Payback period?

- Net present value (NPV)?

- Internal rate of return (IRR)?