Moonbeam Company Is Considering Purchasing a New Machine for $80,000

question 125

Essay

Moonbeam Company is considering purchasing a new machine for $80,000.The new facility will generate annual net cash inflows of $20,000 for six years.At the end of the six years the machine will have no residual value.The company uses straight-line depreciation,and its stockholders demand an annual return of 12% on investments of this nature.
Present value of an ordinary annuity of $1:
$$\begin{array} { | c | c | c | c | c | } \hline & 12 \% & 13 \% & 14 \% & 15 \% \\\hline 1 & 0.893 & 0.885 & 0.877 & 0.87 \\\hline 2 & 1.69 & 1.668 & 1.647 & 1.626 \\\hline 3 & 2.402 & 2.361 & 2.322 & 2.283 \\\hline 4 & 3.037 & 2.974 & 2.914 & 2.855 \\\hline 5 & 3.605 & 3.517 & 3.433 & 3.352 \\\hline 6 & 4.111 & 3.998 & 3.889 & 3.784 \\\hline 7 & 4.564 & 4.423 & 4.288 & 4.160 \\\hline\end{array}$$ Requirements
1.Compute the payback,the ARR,the NPV,the IRR,and the profitability index of this investment.
2.Recommend whether the company should invest in this project.

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Definitions:

Analytics

The systematic analysis of data or statistics, often using advanced methods to extract insights for decision-making or optimization.

Meaningful Patterns

Recognizable arrangements or sequences that have significance or give insight into a particular phenomenon or data set.

Crowdsourcing

Involves obtaining ideas, services, or content by soliciting contributions from a large group of people, especially from an online community.

Automobile Business

The automobile business encompasses all aspects of the design, manufacture, marketing, and sale of motor vehicles, including cars, trucks, and motorcycles, playing a critical role in global economic and industrial development.