, PREVIEW OF QUESTION 1
1.1 Net present value (NPV), internal rate of return (IRR) and payback period (Pb) for
the replacement.
Initial Investment calculation
Installed cost of new machine (8 500 000)
Proceeds from the sale of the old machine 379 200
Change in NWC (475 000)
Initial investment (8 595 800)
The installation costs and networking capital are negative because they are cash
outflows while the proceeds from the old asset is positive because it is a cash inflow.
1.1 Net present value (NPV), internal rate of return (IRR) and payback period (Pb) for
the replacement.
Initial Investment calculation
Installed cost of new machine (8 500 000)
Proceeds from the sale of the old machine 379 200
Change in NWC (475 000)
Initial investment (8 595 800)
The installation costs and networking capital are negative because they are cash
outflows while the proceeds from the old asset is positive because it is a cash inflow.
