Instead of a machine that was purchased for 800,000 four years ago and has an economic life of six years, supply and A machine with an installation cost of $ 1.5 million, a six-year life and a scrap value of $ 90,000 is being considered. If the change happens, the company will earn $ 280,000 from the sale of the old machine. The new machine is old too will be costed by straight line method like a machine. The sixth year scrap value of the old machine is 0. With the supply of the new machine, the annual production cost of the company will decrease from 1 million to 750,000. With this Together, the annual sales revenue of the company will go from 1.5 million to 1.8 million as the product produced will be of higher quality. will rise. These revenues are expected to remain constant throughout the economic life of the projects. The corporate tax rate to which the company is subject is 35%, and the capital opportunity cost is 20%.

a) Identify the free cash flows of the project under main headings and show them in a table.

b) Calculate the payback period, net present value and internal rate of return of the project.

c) The capital cost of the company is a parameter subject to change. The net present value of this project is y-ordinate Draw a net present value profile showing the cost of capital on the x abscissa axis.

(currency is dollars)