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USF Bookstore wants to buy a new coding machine to help control book inventories. The machine sells for $ 3 0 , 0 0 0
USF Bookstore wants to buy a new coding machine to help control book inventories. The machine sells for $ and requires working capital of $ Its estimated useful life is years and it has an estimated salvage value of $ The working capital will also be recovered at the end of the machines useful life. The Company expects to save $ in operating costs per year by purchasing this machine. The Company uses straightline depreciation. Note: all computations are pretax. Required: Compute the net present value of the machine at a rate of return. Compute the internal rate of return of the machine. Compute the payback period of the investment. Run two scenarios that vary inputs that you think the Company should consider. You should only change one item per scenario, and they need to be different items. Compute the NPV and IRR for these scenarios. Note: You cannot change the rate of return. Should the company buy this machine? Why or why not? What other business considerations would you want to point out to the company? Set up your Excel spreadsheet with tabs Input and conclusion Inputs and above Net present value above and internal rate of return above Payback above Scenarios above
USF Bookstore wants to buy a new coding machine to help control book inventories. The machine sells
for $ and requires working capital of $ Its estimated useful life is years and it has an
estimated salvage value of $ The working capital will also be recovered at the end of the
machines useful life. The Company expects to save $ in operating costs per year by purchasing
this machine. The Company uses straightline depreciation. Note: all computations are pretax.
Required:
Compute the net present value of the machine at a rate of return.
Compute the internal rate of return of the machine.
Compute the payback period of the investment.
Run two scenarios that vary inputs that you think the Company should consider. You should only
change one item per scenario, and they need to be different items. Compute the NPV and IRR
for these scenarios. Note: You cannot change the rate of return.
Should the company buy this machine? Why or why not? What other business considerations
would you want to point out to the company?
Set up your Excel spreadsheet with tabs
Input and conclusion Inputs and above
Net present value above and internal rate of return above
Payback above
Scenarios above
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