Question
Carter Company is considering an investment in a additional pole barn building to house equipment that they use to haul lumber. The immediate outlay of
Carter Company is considering an investment in a additional pole barn building to house equipment that they use to haul lumber. The immediate outlay of cash will be $250,000. Currently they spend money to an outside vendor to house the equipment and have an opportunity to save on these costs. The savings will be as follows: Year 1 $75,000 Year 2 $75,000 Year 3 $75,000 Year 4 $80,000 Year 5 $90,000 After this the vendor will need to raise the costs for the last two years, and will not able to house equipment for Carter Company at the end of this time. Because of this Carter Company is seriously considering the pole barn building project now. If Carter Company has a discount rate of 17 percent, should they accept the project? Required: (show your work what keys to you use and the values on the Financial Calculator) a. What is the Net Present Value for this project? b. What is the Internal Rate of Return for this project?
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