Reference no: EM132477711
1) XYZ Inc. is evaluating the purchase of a new machine. The cost of the machine is $500. The incremental cash flows due to the machine are expected to be as follows:
Year 1 $150
Year 2 $200
Year 3 $250
Year 4 $380
The cost of capital for XYZ is 11%.
What is the NPV of this project? _________
Based on your answer, should the project be accepted? Explain why
What is the IRR of this project? _______
Based on your answer, should the project be accepted? Explain why.
2) Green Wave, Inc. is considering the purchase of a $400 machine. The cash inflows expected from using the machine are as follows:
end of year 1 120
end of year 2 200
end of year 3 250
What is the payback for this project? (regular payback, not discounted payback)
If the firm has a policy of only accepting projects with payback of 3 years or less, should the firm accept this project?