Question:
Janes, Inc. is considering the purchase of a machine that would cost $430,000 and would last for 6 years, at the end of which, the machine would have a salvage value of $47,000. The machine would reduce labor and other costs by $109,000 per year. Additional working capital of $4,000 would be needed immediately, all of which would be recovered at the end of 6 years. The company requires a minimum pretax return of 17% on all investment projects. (Ignore income taxes in this problem.)
Required to do:
(a) Determine the net present value of the project.
(b) Calculate the IRR for this project.