Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90,000 and will generate net cash inflows of $19,000 per year for 11 years.
a. What is the project's NPV using a discount rate of 7 percent? (Round to the nearest dollar.) If the discount rate is 7 percent, then the project's NPV is: $
Should the project be accepted? The project (should / should not) be accepted because the NPV is (positive / negative). and therefore (adds / subtracts) value to the firm.
b. What is the project's NPV using a discount rate of 16 percent? If the discount rate is 16 percent, then the project's NPV is: $
Should the project be accepted? Why or why not?
c. What is this project's internal rate of return? (Round to two decimal places.) This project's internal rate of return is: %
Should the project be accepted? Why or why not?
If the project's required discount rate is 7%, then the project (shouls / should not) be accepted because the IRR is (higher than / lower than) the required discount rate.
If the project's required discount rate is 16%, then the project Choose an item. accepted because the IRR is (higher than / lower than). the required discount rate.