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A machine cost \$ 4,000

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Question One (40 points);A machine cost \$ 4,000. It lasts 2 years and has no scrap value;(that is, it has no value at the end of those two years of use). In;each year, it produces \$ 2400 in income. Should the firm invest in;the machine if the interest rate is 10%? Should the firm invest in;the machine if the interest rate is 20%? Why? What if the;machines scrap value was \$350?;Question Two (40 points);Wiley Coyote has been retained to analyze two new projects for;the Acme Company. Each project has a cost of \$10,000, and the;cost of capital for both projects is 12%. The projects net cash;flows are as follows;Year;Project 1;0;1;2;3;4;(10,000);6,500;3,000;3,000;1,000;Project 2;(10,000);3,500;3,500;3,500;3,500;a) Calculate each projects nominal payback period, net;present value (NPV), and internal rate of return (IRR);b) Should both projects be accepted if they are;interdependent?;c) Which project should be accepted if they are mutually;exclusive?;d) Why does a conflict exist between NPV and IRR rankings?;Question 3 (40 points);In the first year, Bubbas Pork Rind factory sold \$ 100,000.;A mere 13 years later, Bubba sold \$ 475,000. What is the;compound growth rate? If Bubbas sales growth continued;unabated, what would Bubbas sales be after the next 13 years?;If, in the above, the initial period had been 10 years, what;would the compound growth rate have been then? What would;you expect the sales to be after 16 more years?

Paper#22527 | Written in 18-Jul-2015

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