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Sunshine Beverages Inc. is considering a new bottling machine that costs $800,000 with a life of 10 years and no salvage value. It will be
Sunshine Beverages Inc. is considering a new bottling machine that costs $800,000 with a life of 10 years and no salvage value. It will be depreciated using the straight-line method. Additional working capital of $90,000 is required, recoverable at the end of year 10. The required rate of return is 11%.
Cash Flows:
Year | Cash Flow |
1 | $130,000 |
2 | $150,000 |
3 | $170,000 |
4 | $190,000 |
5 | $210,000 |
6 | $230,000 |
7 | $250,000 |
8 | $270,000 |
9 | $290,000 |
10 | $310,000 |
Requirements:
- Calculate the Payback Period.
- Determine the NPV.
- Compute the IRR.
- Calculate the PI.
- Decide on the investment based on financial metrics.
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