Reposting because the none of the options given were selected. Can someone else

Question

Reposting because the none of the options given were selected. Can someone else please respond?

XYZ (same company) is now evaluating the purchase of a new machine for $210,000 installed with no NWC change. They plan to sell the machine at the end of 3 years for $40,000. MACRS 3 year depreciation. With the more efficient machine, labor savings per year are expected to be $70,000, $94,000 and $76,000 respectively. 40% tax. The cost of capital for this project is 8.2%

5. What is the discounted payback for this project?

3.2 years

2.94 years

2.52 years

2.99 years

6. If the cost of capital for this project is determined to be equal to their WACC (reference question #5), what is the NPV now?

1271.63

6054.33

1,150

(1054.64)

7. What is the IRR?

8%

9.33%

8.57%

8.31%

Explanation / Answer

Answer 5) Discounted Pay back period are 3.2 years

Answer 6 ) NPV $ 6054.33

Answer 7 ) IRR 6.88 %

Answer 7 ) IRR

$ 210,000.00 PVIF @ 8.2% $    70,000.00 0.924 $      64,695.01 $    94,000.00 0.854 $      80,292.20 $ 116,000.00 0.789 $      91,574.85 $    236,562.05 $ (210,000.00)

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