In: Accounting
Hillside Farms has an apple orchard that they pay migrant workers to work in every fall season. They are considering a new machine that will reduce their costs of labor annually if they purchase the machine. This machine will allow for growing demand that they have in the apple orchard. The cost of the Machine is $170,000 and has a life of 7 years. The labor savings for the next seven years is expected to be: Year 1 $40,000 Year 2 $45,000 Year 3 $45,000 Year 4 $50,000 Year 5 $50,000 Year 6 $55,000 If Hillside farms has a discount rate of 15% should they accept the project? Required: (show your work – what keys to you use and the values on the Financial Calculator) a. What is the Net Present Value for this project? b. What is the Internal Rate of Return for this project? .
Answer . The labour saving is provided only for 6 years
since the npv is -ve on 17% the IRR will be 16.17%