PROJECT - FAST TRACK: Proposal for an investment in Machinery. CASH FLOW ANLAYSIS Expected Expected Additional Information: Net Income Net cash Flow US $ US $ Cost of Machine $16,000 Annual sales of new product 30,000 30,000 Useful life 8 years Annual expenses: Materials, Labor, Overhead (not depreciation) (15,500) (15,500) Salvage Value zer0 Depreciation - machinery (2,000) Additional Selling & Admin expenses (9,500) (9,500) Production units per year 1,000 Annual Pre-tax Income 3,000 price per unit 30 Income Taxes @ 30% on pre-tax income (900) (900) Annual net cash flow 2,100 4,100 Corporate Hurdle rate for IRR = 10%

Q.1Determine the Net Present Value for the proposal:

AnnuityYearsPVF

Net Cash Inflows

$01-80$-

Purchase of machine$ 16,0001

$(16,000)

Net Present value

$(16,000)

Q . 2 (a)Determine the InternalRate of Return for the proposal

Amount invested

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Annual net cash inflows

-

Hurdle Rate - Table B 3 -8 years @ 10%

-

Q . 2 (b)Is the Fast Track Project above or below the Corporate Hurdle Rate?