Exercise 26-15 NPV and IRR for automation investment LO P3, P4

OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $6.0 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $900,000 per year in direct labor costs. The company requires a 12% return from its investments. 1. Compute the proposed investments net present value. 2. Using your answer from part 1, is the investments internal rate of return higher or lower than 12%?

What is the net present value?