Solution-Determine what is the internal rate of return of

Determine what is the internal rate of return of the project

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Reference no: EM132518225

BD Corporation is contemplating the purchase of a new $500,000 laser cutter to help with the production of its flat screen TV displays. The laser cutter will be depreciated straight-line over its five-year useful life. BD Corporation will want to upgrade the laser cutter after three years to a more technologically advanced model. At the end of the third year, it is estimated that it can be sold for $250,000. The new laser cutter will generate $300,000 per year in Sales, $75,000 in Variable Costs and $50,000 in Fixed Costs. The laser cutter will require a $25,000 investment in Net Working Capital (NWC). The tax rate is 35 percent.

Question 1: What is the Net Present Value (NPV) of this project using the WACC 11.39%? Should we accept/reject this project?

Question 2: What is the Internal Rate of Return (IRR) of this project? Should we accept/reject this project if we can borrow money from Bank of America at 16%? What is the Profitability Index (P/I) of this project with a 10% discount rate? Should we accept/reject this project?)

Reference no: EM132518225

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Determine what is the internal rate of return of the project

Reference no: EM132518225

Reference no: EM132518225

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