Capital Expenditure Conclusion

If my business deposits $130,000 today into an investment fund that is expected to grow at an annual rate of 6%, what will be the value of this investment?

  • 2 years from now
  • 4 years from now
  • 7 years from now

I am also considering a new system with a total cost of $2,300,000, which includes the installation. The expected cash flows from each year of the five-year period are: $250,000, $320,000, $350,000, $400,000, and $425,000.

  • What is the internal rate of return (IRR) for the project?
  • Given the interest rate of 10%, what is the Net Present Value (NVP) for the new system?
  • Considering the IRR and the NPV, would you recommend that I purchase the system?

Use Excel for the computations and explanation of how you came about them.