The following information will be used for questions eight and nine.
The Beetle Company is evaluating a purchase of machine for 1,000,000 that will provide a 10-year annual cash flow of $200,000. The company expects the salvage value of the asset to be $100,000. In addition, the machine will require maintenance costs of $100,000 at the end of the fourth year and $150,000 at the end of the seventh year. The project requires an investment in working capital at the beginning of the project of $50,000.
What is the payback period for this project?
Select one:
a. 5 years
b. 5.75 years
c. 5.5 years
d. 6 years
Assuming that the Beetle Company has a WACC of 11%, what is the net present value of this project?
Select one:
a. $180,674
b. $163,064
c. $42,552
d. $24,943