Problem: Nucore Company is thinking of purchasing a new candy-wrapping machine at a cost of $370,000. The machine should save the company approximately $70,000 in operating costs per year over its estimated useful life of 10 years. The salvage value at the end of 10 years is expected to be $15,000. (Ignore income tax effects.)
Required to do:
Question 1. What is the machine's payback period?
Question 2. Compute the net present value of the machine if the cost of capital is 12%.
Question 3. What is the expected internal rate of return for this machine?