Problem:
Diltz farms are considering investing in an automated egg-sorting system to increase production for international (web-based) sales of Diltz farms products. The new system will cost $3,000 including installation. it will be fully depreciated in 5 yrs. (straight-line) to zero and generate $150 after-tax gain at the end of the projected period (year 6). The initial working capital will be $500 in year one and increase each year thereafter by 5 percent. Revenues generated from the egg-sorter are expected to be $900 in year one, and increase by five percent each year. Expenses are ten percent of revenues. Diltz Farms' opportunity cost of capital is 8.5%. Using the discounted cash-flow analysis, should Diltz Farms invest in the machinery? What is the NPV of the egg-sorter project?
Requirement:
Question 1: With a required rate of 8.5%, should Diltz Farms go ahead with the new egg-sorter?
Question 2: What is the NPV of the egg-sorter project?
Question 3: What is the IRR of the project?
Question 4: What is the NPV if the required return is 9%?
Note: Could someone please give me a step by step solution?