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    Calculate: Payback, Net Present Value, and the Internal Rate of Return

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    Nucore Company is thinking of purchasing a new candy-wrapping machine at a cost of $370,000. The machine should save the company approximately $70,000 in operating costs per year over its estimated useful life of 10 years. The salvage value at the end of 10 years is expected to be $15,000. (Ignore income tax effects.)

    Please use an Excel spreadsheet to answer the following:
    - What is the machine's payback period?
    - Compute the net present value of the machine if the cost of capital is 12%.
    - What is the expected internal rate of return for this machine?

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    Solution Summary

    This solution is comprised of a detailed, step by step explanation which demonstrates the required calculations needed to compute payback, net present value, and the internal rate of return. The completed solution is prepared in an Excel file which has been attached.