Determine what is the machine payback period

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Question a) RNXD Inc. has the opportunity to market a product for 5 years under a specialty contract. The product will provide the company with net cash flows of $40,000. The investment calls for an initial working capital investment $280,000. The investment also calls for the purchase of equipment for $200,000. The machinery will have a salvage value of $45,000 at the end of the contract. RNXD Inc. is subject to a 16% discount rate. The net present value of this investment opportunity is?

Question b) A local machine shop purchased a new milling machine yesterday for $75,180 which is expected to generate annual cash savings of $12,000 for the next sixteen years after which the machine will have no salvage value. What is the machine's internal rate of return?

Question c) RNX Inc. purchased a machine for $40,000 which will save the company approximately $16,000 in even cash flows per year. What is the machine's payback period?

Reference no: EM132587215

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