Evaluate the project based on the criteria

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Question: A company wants to replace a machine with a better version. The replacement machine will require a net investment of $200,000 and is expected to generate free cash flow of $100,000 per year for the next five years. The company requires 12% return on capital investments of this sort and desires a 24-month pay back period. The existing machine would continue to function for the next five years if it is not replaced, but gradually become less useful. Free cash flows for the existing machine are forecasted to be $80,000 in year 1, $60,000 in year 2, $40,000 in year 3, $20,000 in year 4 and $10,000 in year 5. Evaluate the project based on the criteria of net present value, internal rate of return and pay back period and indicate the correct responses below. Choose all responses which are correct A company wants to replace a machine with a better version. The replacement machine will require a net investment of $200,000 and is expected to generate free cash flow of $100,000 per year for the next five years. The company requires 12% return on capital investments of this sort and desires a 24-month pay back period. The existing machine

Reference no: EM133612375

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