Springfield Manufacturing Co. is considering the investment of$60,000 in a new machine. The machine will generate cash flow of$7,500 per year for each year of its 15 year life and will have asalvage value of $4,000 at the end of its life. Springfield's costof capital is 10%.
(a.) Calculate the net present value of the proposed investment.Ignore income taxes, and round all answers to the nearest $1.
(b.) Calculate the present value ratio of the investment.
(c.) What will the internal rate of return on this investment berelative to the cost of capital? Explain your answer.
(d.) Calculate the payback period of the investment.
