Question

Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90,000 and will generate net cah inflows of $19,000 per year for 11 years.

Part 1)

If the discount rate is 8 percent, then the project's NPV is $_______

The project should/should not be accepted because the NPV ispositive/negative and therefore adds/does not add value to the firm.

Part 2)

If the discount rate is 16 percent, then the project's NPV is $_______

The project should/should not be accepted because the NPV ispositive/negative and therefore adds/does not add value to the firm.

Part 3)

What is the projects internal rate of return? Should the project be accepted?