Question: Strident Marks is considering for buying new manufacturing equipment that costs dollar 1,300,000 & is expected to improve cash flows by dollar 500,000 in year 1st, $350,000 in year 2nd, $475,000 in year 3rd, $450,000 in year 4th, and dollar 300,000 in year 5th.
Determine key financial metrics for this capital budgeting project. A 14 percent rate of return & a payback period of less than 5 years are required for the project. These key metrics must include [1] payback period, [2] net present value, & [3] internal rate of return. [Use 6 percent as the weighted average cost of capital].
In a memo to the CFO, talk about the metrics & make a recommendation whether to accept or reject the project.