1. You have been asked to assess a proposed project to buy a new automated assembly machine that will replace four workers. The machine will cost $315,000 to buy and install. It will also have an estimated maintenance cost of $2000 annually. The machine's expected lifespan will be 14 years and it will have an estimated salvage value of $4500 at the end of those 14 years. The machine will save the cost of four employees, whose individual salary and benefits cost is $41,000 per year. The corporate WACC rate is 5%. What is the NPV and IRR of this cashflow?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
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1. You have been asked to assess a proposed project to buy a new automated assembly machine
that will replace four workers. The machine will cost $315,000 to buy and install. It will also
have an estimated maintenance cost of $2000 annually. The machine's expected lifespan will be
14 years and it will have an estimated salvage value of $4500 at the end of those 14 years. The
machine will save the cost of four employees, whose individual salary and benefits cost is
$41,000 per year. The corporate WACC rate is 5%. What is the NPV and IRR of this cashflow?
Transcribed Image Text:1. You have been asked to assess a proposed project to buy a new automated assembly machine that will replace four workers. The machine will cost $315,000 to buy and install. It will also have an estimated maintenance cost of $2000 annually. The machine's expected lifespan will be 14 years and it will have an estimated salvage value of $4500 at the end of those 14 years. The machine will save the cost of four employees, whose individual salary and benefits cost is $41,000 per year. The corporate WACC rate is 5%. What is the NPV and IRR of this cashflow?
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