Solution-Calculate the net present value and internal rate

Calculate the net present value and internal rate of return

Reference no: EM133114078

Question - Calculating NPV and IRR Using Excel - Sherwin Moore Paint Company would like to further automate its production process by purchasing production equipment for $660,000. The equipment is expected to have a useful life of 8 years, and will be sold at the end of 8 years for $40,000. The equipment requires significant maintenance work at an annual cost of $75,000. Labor and material cost savings, shown in the table, are also expected to be significant.

Year 1	$160,000
Year 2	$190,000
Year 3	$200,000
Year 4	$240,000
Year 5	$280,000
Year 6	$220,000
Year 7	$180,000
Year 8	$155,000

The company's required rate of return is 11 percent.

Required -

1. Use Excel to calculate the net present value and internal rate of return in a format similar to the Computer Application spreadsheet shown in the chapter.

2. Should the company purchase the production equipment? Explain.

Reference no: EM133114078

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Calculate the net present value and internal rate of return

Reference no: EM133114078

Reference no: EM133114078

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