The Allied Group is considering two investments. The first investment involves a packaging machine, which can be used to package garments for shipping orders to customers. The second possible investment would be a molding machine that would be used to mold the mannequin parts.
The first possible investment is the packaging machine, which will cost $14,000. The second investment, the molding machine, would cost $12,000. The expected cash flows for the two projects are given below and the cost of capital to the firm is 15%. Both machines will be unusable after five years and have no salvage value.
The net cash flows for the two possible projects are given in the following table:
Year Packaging Machine Molding Machine
0 ($14000) ($12,000)
1 4100 3200
2 3300 2800
3 2900 2800
4 2200 2200
5 1200 2200
Address all of the following questions in a brief but thorough manner.
• What is each project’s payback period? Provide a detailed explanation of how you calculated the payback period for each.
• What is the NPV for each project? Provide a detailed explanation of how you calculated the payback period for each.
• What is the IRR for each project? Provide a detailed explanation of how you calculated the internal rate of return (IRR) for each.
• If both of the projects can be selected, then should both be selected? Why or why not? Explain why or why not.If the two projects are mutually exclusive, which project, if any, should be selected? Explain why.
Submission Details:
• Submit your 4 to 5 page Microsoft Word document, using Ace homework tutors – APA style.
Two investments are being considered by the Allied Group. The initial investment is in a packaging equipment that can package clothing for shipping orders to customers. A molding machine, which would be used to form the mannequin pieces, would be the second prospective investment.
The packing equipment, which will cost $14,000, is the first conceivable investment. The molding machine, the second expenditure, would cost $12,000. The predicted cash flows for the two projects are shown below, with the firm’s cost of capital set at 15%. After five years, both machines will be inoperable and have no salvage value.
The following table shows the net cash flows for the two feasible projects:
0 ($14000) ($12,000) Packaging Machine Molding Machine 0 ($14000) Molding Machine 0 ($14000) Molding Machine 0 ($14000)
2 3300 2800 3 2900 2800 4 2200 2200 5 1200 2200
Answer all of the following questions succinctly yet thoroughly.
• What is the payback period for each project? Give a clear description of how you arrived at each payback period.
• What is the net present value (NPV) of each project? Give a clear description of how you arrived at each payback period.
• What is the internal rate of return for each project? Give a detailed description of how you arrived at each internal rate of return (IRR).
• Should both of the projects be chosen if they are both possible? Why do you think that is? Explain why you think that is or why you don’t think that is. Which project, if any, should be chosen if the two are mutually exclusive? I need help writing my essay – research paper explain why.
• Create a 4 to 5 page Microsoft Word document in Ace homework tutors – APA style and submit it.
