Find the NPV/IRR of by hand :

To cope with the current factory closures GM would like to replace an old parts producing machine with a 3d printer. The old machine was bought 10 years ago and at that point was expected last for 20 years. Initially $1,000 was spent bringing and installing it. The new printer would cost $100,000. The old machine cost $40,000 and had been expected to have a salvage value of $0 (zero) in twenty years.

The new printer is expected to last for 10 years at which point it will have a salvage value of $50,000. The old machine could be currently sold for $3,000. GM also has other machines for the same purpose in the same asset pool. The machines fall in an asset class with an annual 5% depreciation or CCA rate.

Due to its increased speed of production GM would be able to sell more parts and increase annual pretax revenues by $30,000. There would be an additional cost of $10,000 incurred annually for consumables and to maintain the printer.

Determine the NPV and IRR for this opportunity and make a recommendation. Explain how you would use solver or goalseek to find this value once you have setup all the data in a spreadsheet.

We assume there are no changes in working capital required. The weighted average cost of capital is 12% and the tax rate is 40%.

Use 10% as the second rate if you need a lower rate for interpolation by hand and use 15% if you need a higher rate.