Problem:
Strident Marks is considering purchasing new manufacturing equipment that costs $1,300,000 and is expected to improve cash flows by $500,000 in year 1, $350,000 in year 2, $475,000 in year 3, $450,000 in year 4, and $300,000 in year 5. Calculate key financial metrics for this capital budgeting project. A 14% rate of return and a payback period of less than five years are required for this project. These key metrics must include (1)payback period, (2) net present value, and (3) internal rate of return. (Use 6% as the weighted average cost of capital). In a memo to the CFO, discuss the metrics and make a recommendation whether to accept or reject the project. Please include spreadsheet of figures.