Scenario $1$: Evaluating a New Investment

Background: Alamac Building Products is considering investing in a new production line that will automate several processes currently done manually. The total cost of the investment is estimated at $$3,500,000.$

Task: Calculate the Net Present Value $($NPV$)$ and Internal Rate of Return $($IRR$)$ for the project, assuming it generates incremental revenues of $$700,000$ annually over ten years. The company's cost of capital is $8\%.$ Discuss how the time value of money affects the valuation of this project and explain what the NPV and IRR results suggest to operations managers about the financial viability of the project.