Reference no: EM131058833

Calculate the Net Present Value and Internal Rate of Return relative to the purchase of a new widget making machine.

- Machinecost $3,400,000
- Useful life: 7 years
- For tax purposes a 30 percent reducing balance depreciation would be used.
- Maintenance cost per annum: $75,000.
- Maintenance technician salary per annum: $125,000
- Operator's salary: $90,000, plus 35 per cent on-costs.
- Restructuring cost (First year only): $180,000.
- Employee training costs are projected as follows:

First Year $35,000

Second Year $25,000

Third Year $10,000
- Increase in working capital required: $60,000.
- Salvage value: $75,000.
- Manufacturing cost savings per annum: $1,200,000.
- Sale of now obsolete equipment over the next two years.

o Company cost of capital: 10%
o Tax rate: 30%.