Q1) New drill press is considered possible new investment for EXRON Corporation if it create expected return of $2,000 per year for first five years and $2,500 per year for last five years. Its expected purchase price (including installation) is $9,400. Compute drill press project's expected internal rate of return?
Assume that EXRON can borrow essential funds in money and capital markets to make this investment at cost of 15%. Should it proceed with project?
If EXRON's investors' required rate of return is 16%, compute NPV of drill press project? Based on calculation of NPV should EXRON pursue this project any further?