Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Determine the net present value and internal rate of return using the project values provided below. The project will cost $35,000 to implement. It is

Determine the net present value and internal rate of return using the project values provided below. 
  • The project will cost $35,000 to implement.
  • It is expected to have a 5 year life.
  • Y1 it will reduce PPE costs by $8,250 but your gizmo is a tricky device. It requires regular maintenance. Y1 maintenance costs are expected to be $5,100
  • Y2 savings will be $16,000 and maintenance costs will be $3,300
  • Y3 savings will be $14,500 and maintenance costs will be $4,850
  • Y4 savings will be $7,200 and maintenance costs will be $3,000
  • Y5 savings will be $9,555 and maintenance costs will be $5,500
  • Assume a discount rate of 12%
  • What is the NPV for this project? And should you invest in it? Why or why not?
  • What is the IRR for this project? Is its IRR acceptable? Why or why not?

Based on the your calculations and knowledge that engineering controls are more reliable than PPE, and PPE dependence declines due to your gizmo's use, what would you recommend your employer do considering your cost and benefit analysis?

Answers should be done on an excel worksheet showing calculations and formulas

Step by Step Solution

There are 3 Steps involved in it

Step: 1

To determine the Net Present Value NPV and Internal Rate of Return IRR for the project you would typ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamental Managerial Accounting Concepts

Authors: Edmonds, Tsay, olds

6th Edition

71220720, 78110890, 9780071220729, 978-0078110894

More Books

Students also viewed these Finance questions

Question

Contrast Plato with Aristotle in their approaches to knowledge.

Answered: 1 week ago