Capital budgeting decision- Danforth Tire Company
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The Danforth Tire Company is considering the purchase of a new machine that would increase the speed of manufacturing and save money. The net cost of this machine is $66,000. The annual cash flows have the following projections:
Year Cash Flow
1 21,000
2 29,000
3 36,000
4 16,000
5 8,000
a. If the vcost of capital is 10 percent, what is the net present value?
b. What is the internal rate of return?
c. Should the project be accepted. Why?
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Solution Summary
The capital budgeting decision- purchase of a new machine for Danforth Tire Company is evaluated using NPV and IRR
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