Problem
Consider the following data all expressed in dollars:
|
Timeline
|
Today
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
Year 5
|
|
Purchase price
|
(40,000)
|
|
|
|
|
|
|
Maintenance cost
|
|
(2,000)
|
(2,000)
|
(2,000)
|
(1,000)
|
(500)
|
|
Labor savings
|
|
12,000
|
12,000
|
12,000
|
(12,000)
|
(12,000)
|
|
Salvage value
|
|
|
|
|
|
3,000
|
|
Total cash in (out)
|
(40,000)
|
10,000
|
10,000
|
10,000
|
11,000
|
14,500
|
Understand that a comma in the above table separates three digits, and should not be understood to be decimal demarcation. For example, the number "1,000" means one thousand, and not the number one to three decimal positions. Furthermore, parentheses around a number means that it is a negative number.
Calculate the net present value and the internal rate of return. For the net present value calculation, use a 3% discount rate. Use a spreadsheet program (e.g., Microsoft Excel, OpenOffice Calc, etc) to perform the calculation.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.