Reference no: EM132597058

Question 1: Nagle's Machinery is spending $97,500 to update its equipment. This is necessary if the firm wishes to be competitive in the marketplace and provide a wide array of product models. The company estimates that these updates will improve their cash inflows by $18,500 a year for 5 years. What is the payback period?

Question 2: An investment has an initial cost of $400,000. It is a four-year project with expected cash flows as shown below. If you require a 15.5% IRR on the project, should you proceed? Why or why not?

Year                          1                2              3                    4

Net income                $120,000    $124,600   $138,700         $130,000

Question 3: An investment has an initial cost of $200,000 and a life of four years. It is expected to generate net cash flows as shown below. Should this project be accepted based on a discount rate of 8%? Why or why not?

Year                               1                   2                     3                     4

Cash Flow                 $28,000             $70,600        $88,700              $92,400