Big Steve’s, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine.

QUESTION

Big
Steve’s, makers of swizzle sticks, is considering the purchase of a new plastic
stamping machine. This investment requires
an initial
outlay of $100,000 and will generate free cash inflows of $18,000 per year for
10 years. For each of the listed required rates of return, determine the
project’s net present value.

1. The required rate
of return is 10 percent. 2. The required rate of return is 15 percent. 3. Would
the project be accepted under part (a) or (b)? 4. What is this project’s
internal rate of return?

ANSWER:

REQUEST HELP FROM A TUTOR