1. You are considering a machine that would cost $850,000 and produce cash flows of $300,000 the first year, $200,000 per year for the next two years and $400,000 in the final year. Your required return is 10%. What is the IRR of buying the machine?
A. 20.41%
B. 21.23%
C. 10.59%
D. 8.73%
2. The consulting firm your boss hired has said that you should invest $1 million into a new personnel management system that will reduce your overhead costs by $200,000 per year for the first three years, then $400,000 the next year, and $500,000 in the final year. If your firm has a required return of 15%, what is the NPV of the new system?
A. $492,080
B. $500,000
C. $1,933,935
D. -$66,065