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Subject:
Calculation the NPV assuming a discount factor of 8% and of the IRR
Category: Business and Money Asked by: irfanrashid-ga List Price: $2.00 |
Posted:
15 Mar 2005 08:09 PST
Expires: 14 Apr 2005 09:09 PDT Question ID: 495031 |
1. The new machine will have a 11-year life (counting 0 to 1 as the first year).. 2. The new machine should save on annual labour costs. In the first year it will save £15000 and this figure will increase by £1000 on a year-by-year basis. 3. It will also save on operating supplies: £500pa for the first four years, £600 pa for next four years and £700 pa for the last three years. 4. A small maintenance saving of £100 pa will be realised for each of the years except the first. 5. An initial installation cost of £4000 will be charged in the first year. 6. The machine will cost £140,000. 7. A starting inventory cost of £200 will also have to be made. The company CEO does not like spreadsheets as he wants to see all the working. However, the CEO needs: 1. A calculation the net present value (NPV) assuming a discount factor of 8%. 2. A calculation of the IRR ? using discounting tables. |
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