Question: The Danforth Tire Company is considering the purchase of a new machine that would increase the speed of manufacturing and save money. The net cost of this machine is 66,000 dollars. The yearly cash flows have the following projections.
|
Year
|
Cash flows
|
|
1
|
$21,000
|
|
2
|
$29,000
|
|
3
|
$36,000
|
|
4
|
$16,000
|
|
5
|
$8,000
|
[A] Determine the internal rate of return?
[B] Should the project be accepted? Explain?
[C] If the cost of capital is 10%, determine the net present value?