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Question 2: (30 points). (Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This
Question 2: (30 points). (Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90,000 and will generate net cash inflows of $19,000 per year for 11 years. To answer Orange item questions, keep the text that is the best answer a. What is the project's NPV using a discount rate of 7 percent? (Round to the nearest dollar.) If the discount rate is 7 percent, then the project's NPV is: S Should the project be accepted? The project should be or should not be accepted because the NPV is positive or negative and therefore [adds or subtracts value to the firm b. What is the project's NPV using a discount rate of 16 percent? If the discount rate is 16 percent, then the project's NPV is: S Should the project be accepted? Why or why not? c. What is this project's internal rate of return? (Round to two decimal places.) This project's internal rate of return is: Should the project be accepted? Why or why not? If the project's required discount rate is 7%, then the project I should be or should not be l accepted because the IRR is higher than or lower than the required discount rate. If the projects required discount rate is 16%, then the project I should be or should not be accepted because the IRR is higher than or lower than the required discount rate
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