What is the NPV, IRR, and MIRR when considering

whether to buy new model when:

Cost of capital: 11%

Income taxes: 20%

New model purchase price: $2,000,000

Installation costs: $85,000

The existing asset was originally aquired and

installed for: $650,000

To date, on the existing asset, claimed depreciation expenses for tax purposes: $175,000

Today the existing asset could be sold for: $450,000

At the end of the project's 5 year lifespan, after tax

salvage value of the new asset would be $600,000

The after tax salvage value of the existing asset after 5 years would be: $140,000

If we take the new project, the balance sheet would change in the following ways:

Accounts receivable would increase by: $75,000

Accounts payable would increase by: $120,000

Inventory would increase by: $90,000

If we take the new project, in the first year:

Sales will increase by $500,000

Operating cost (excluding depreciation expense) will increase by: $150,000

For tax purposes, will will claim an additional

depreciation expense of: $100,000

Interest expense will increase by $65,000

Also, if we take the new project, the operating cash flow for year 2 will be 10% greater than year 1. This pattern will continue and operating cash flow is anticipated to be 10% greater year 3 than it was in year 2, 10% greater in year 4 than in year 3, and 10% greater in year 5 than it was in year 4

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