1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be $800,000 per year. The system costs $4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? Please show your work.
2. Sterling Wetzel has just invested $270,000 in a restaurant specializing in German food. He expects to receive $43,470 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Enter your answer as a whole percentage value (for example,16% should be entered as "16" in the answer box). Did Sterling make a good decision?