23 Feb Please show complete work to get most helpful answ
Please show complete work to get most helpful answer rating.Your assistant has just given you some data on a potential option of working cooperatively with another company rather than purchasing the $200,000 new equipment. The details of this option are: initial investment $120,000, operating cash flows years 1-3 of $47,000, 49,000, 52,000 respectively. NOTE these OCF numbers already take into account depreciation effect and terminal cash flow for this cooperative agreement so there is no need to calculate further. Cost of capital for this project is 7.5%.The manufacturer of the new equipment has just come forward with a financing option that lowers the cost of capital on the machine purchase to 7% (instead of the original 7.5%). What is the new NPV and IRR based on this change?
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