Allied Group Investment Analysis
The Allied Group is considering two investments. The first investment involves a packaging machine, which can be used to package garments for shipping orders to customers. The second possible investment would be a molding machine that would be used to mold the mannequin parts.
The first possible investment is the packaging machine, which will cost $14,000. The second investment, the molding machine, would cost $12,000. The expected cash flows for the two projects are given below and the cost of capital to the firm is 15%. Both machines will be unusable after five years and have no salvage value.The net cash flows for the two possible projects are given in the following table:
Year Packaging Machine Molding Machine 0 ($14000) ($12,000)1 4100 32002 3300 28003 2900 2800 4 2200 22005 1200 2200
Address all of the following questions in a brief but thorough manner.
What is each project’s payback period? Provide a detailed explanation of how you calculated the payback period for each.
What is the NPV for each project? Provide a detailed explanation of how you calculated the payback period for each.
What is the IRR for each project? Provide a detailed explanation of how you calculated the internal rate of return (IRR) for each.
Submit your 2- to 3-page Microsoft Word document, using APA style.
Name your report: MBA5009_W5_ LastName_FirstInitial.doc.
Submit to the Submissions Area by the due date assigned.