Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
You have been asked to select an alternative project based on its IRR. The project invovles buying a new poliching machine that will replace three workers who polish the parts by hand. The machine will cost $375,280 in year 1. The workers each cost $31,000 per year in salary and benefits. The machine will require and expected $1500 per year in maintenance and will have a useful lifespan of 9 years. At the end of 9 years, the machine will have an expected salvage value of $7000. Your corporate WACC is 5%. What is the IRR for this project cashflow?
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