Kingston Corporation is considering a new machine that requires an initial investment of $550,000, including installation costs, and has a useful life of eight years. The expected annual after-tax cash flows for the machine are $89,000 during the first three years, $95,000 during years for through six, and $105,000 during the last two years.
(a) Calculate the internal rate of return—IRR
(b) Calculate the net present value—NPV—at the following required rates of return: (1) 3% (2) 4% (3) 8% (4) 9%
(c) Using the IRR and NPV criterion, comment if the projects should be accepted or rejected at the following required rates of return: (1) 3% (2) 4% (3) 8% (4) 9%