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Compo Research plans to purchase a new centrifuge machine for its New Mexico facility. The machine costs $567,000 and is expected to have a
Compo Research plans to purchase a new centrifuge machine for its New Mexico facility. The machine costs $567,000 and is expected to have a useful life of 8 years, with a terminal disposal value of $54,000. Savings in cash operating costs are xpected to be $108,000 per year. However, additional working capital is needed to keep the machine running efficiently. The working capital must continually be replaced, so an investment of $38,000 needs to be maintained at all times, but this nvestment is fully recoverable (will be "cashed in") at the end of the useful life. Compo Research's required rate of return is 8%. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts. Compo Research uses straight-line depreciation for its machines. Requirement 1. Calculate net present value. (Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for a negative net present value. Enter the net present value of the investment rounded to the nearest whole dollar) The net present value is Requirement 2. Calculate internal rate of return. (Use a trial-and-error approach and straight-line interpolation as necessary. Round all present value calculations The internal rate of return (IRR) is %. o the nearest whole dollar and round the IRR to two decimal places, X.XX%.)
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