Use Excel to calculate the Internal Rate of Return of each of the following potential investments and recommend whether or not to include them in the upcoming capital budget given that the firms cost of capital is 14.5%.

New Software:

Initial Cost $25,000

Training Cost $12,000

Annual Cost Savings $10,500

Useful Life 6 Years

Machine A or Machine B Note: The key word here is or. One or the other machine must be bought. So, the analysis should be based on the incremental cash flows resulting from the more expensive alternative.

Annual Production in units 40,000

Cost of Machine A $38,000

Cost of Machine B $32,000

Unit Cost to Produce on Machine A $2.20

Unit Cost to Produce on Machine B $2.22

Useful Life 12 Years