FINE WOOD MACHINING IS CONSIDERING REPLACING AN EXISTING LATHE WITH A MORE EFFICIENT LATH. THE NEW LATHE COST $55,000 AND REQUIRES $5,000 IN INSTALLATION COST. THE OLD LATHE WAS PURCHASED 2 YEARS AGO FOR AN INSTALLED COST OF $35,000 AND HAS A BOOK VALUE OF $16,800. IT CAN BE SOLD TODAY FOR $20,000. ASSUME THE NEW MACHINE INCREASES WORKING CAPITAL BY $2,000. THE FIRM IS IN THE 21% TAX BRACKET. THE NEW MACHINE WILL PROVIDE $15,000/YEAR OF INCREMENTAL OPERATING CASH FLOWS FOR 4 YEARS AND THE COMPANYS COST OF CAPITAL IS 10%.

I HAVE THE BA II PLUS AND THE TI-84 PLUS, PLEASE SHOW YOUR CALCULATED WORK. THANKS!

A: WHAT IS THE INITIAL INVESTMENT FOR THE PROPOSED PROJECT?

B: COMPUTE THE NET PRESENT VALUE FOR THE PROJECT.

C: COMPUTE THE IRR.

D: MAKE A RECOMMENDATION TO ACCEPT OR REJECT THE PROJECT AND EXPLAIN.