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In: Accounting

Sri Coffee Pty Ltd is considering investing in a new coffee bean roasting machine. The machine...

Sri Coffee Pty Ltd is considering investing in a new coffee bean roasting machine. The machine is estimated to cost $150,000 which can last for 7 years before it becomes too costly to maintain and can be sold for scrap at $15,000. The project is estimated to bring in additional $30,000 cash inflow and incur $10,000 in additional expenses related to the running the machine in the first year. The company expects there will be an annual sales growth of 5% from year 2 onward. Expenses are also expected to grow by 2% annually from the second year of the operation.  

The company plans to fund the purchase of the new machine using a bank loan with an interest rate of 13%.

  1. How long is the payback period for this project?  years. Case sensitive. Type in 7.00 (two decimal places) for 7 years.
  2. What is the NPV for this project? $.  Case sensitive. Type in 120,000.00 (two decimal places) for $120,000.00, or -120,000.00 for negative $120,000.00.
  3. What is the IRR for this project?  %.  Case sensitive. Type in 20.00 (two decimal places) for 20%.

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Expert Solution

ekkarill92 answered 2 years ago
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