Hi There,

The professor said to calculate the NPV and IRR of the project. Based on your workings and assumptions, indicate whether you would accept the project, explaining why. Here's an example to follow instructions above:

I work in a regional marketing office and we are planning on putting in a new phone system which will save us the cost of 1 support staff employee. We can save on the cost of 1 employee since the new phone system will have the ability to be monitored by home office if there is no one in the office to help. Currently we do not have this ability and since most of us that work in the regional office travel 3 days a week we often have no regional office support and currently home office cant answer our phones since we are on 2 different phone systems. By purchasing a new phone system that is compatible with our home office servers we will then have 24/7 customer support without having to hire an additional employee:

Cost of the Equipment: $65,000

Useful life: 10 years

Exit Cost: $1,500 scrap

Cost: Initial set up and training: $3,500

Ongoing IT support of the phone lines $1,500 per year

Revenue: $35,000 per year.

Year 1 Year 2 Year 10

Revenue $35,000 Revenue: $35,000 Revenue: $35,000

Cost: $7,500 initial set up

Cost: $3,500 IT Support Cost: $3,500 Cost: $3,500