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What is the net present value of the robot investment

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Reference no: EM132213662

Question - The mighty mouse company is considering whether or not install a package robot the robot cost 500,000 including shipping and installation. The robot can be depreciated using MACRS as a five year asset MACRS depreciation rates for five years asset 20%, 32%, 19.2%, 11.52%, 11.52%, and 5.76% the robot is expected for last five years at which time management expects to sell it for parts for 100,000 the robot is expected to replace five employees in the shipping department saving the company 150,000 each year might tax rate is 30%

a. What are the net cash flows for each year of the robots five year life?

b. What is the net present value of the robot investment if the cost of capital is 10%?

c. What is the net present value of the robot investment if the cost of capital is 5%?

d. What is the profitability index of this investment if the cost of capital is 5%?

e. What is the payback period of the robot investment?

f. What is the discounted payback period of the robot investment if the cost of capital is 5 %?

g. What is the internal rate of return of the robot investment?

h. What is the modified internal rate of return of the robot investment if the cash flows are reinvested at 5%?

i. If the cost of the capital is 5% should mighty mouse invest in this robot?

Reference no: EM132213662

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