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Operating Capital and Payback Period

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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.)

Required:
1. What is the machine's payback period?

2. Compute the net present value of the machine if the cost of capital is 12%?

3. What is the expected internal rate of return for this machine?

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Solution Summary

This solution shows step-by-step calculations to determine payback period, net present value, and expected internal rate of return of the machine in an Excel sheet.

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