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Kids Moving (KM), a small not-for-profit sports center isconsidering purchasing a new set of pitching machines theycurrently rent. There will be annual maintenance on the machinesthat KM will now have to pay. And at the end of 5 years, themachine will be worthless and you will have to pay to have it takenaway. The following data has been obtained:

Cost of equipment needed $444,444

Working capital needed (released at end of project)$20,000

Annual savings on rent not paid $180,000

Annual maintenance expense $66,666

Disposal cost at the end of the project * $8,888

cost of capital 7%

* You will have to pay $8,888 to have the machine takenaway.

Complete the following questions and submit as a MicrosoftEXCEL document.

Compute the NPV and the IRR of the investment.

Should the KM invest in the project?

What would your answer be if the purchase will requireadditional staff training all during year 1 of $11,000? (NetPresent Value? IRR? Decision?)

Steps

Put in the year - Don’t forget to start with time 0(now).

Put in the interest rate (not the tax rate– remember this is apercentage).

Skip a line.

Put in the cash inflows and outflows.

Reference the taxes if applicable.

Compute the cash flows and highlight.

Compute the PV of the cash flows (see above).

Compute the net present value by summing the PV of the cashflows from step G (do not use the NPV key).

Compute the internal rate return of the cash flows(highlighted amount).

Evaluate – consider mission, strategy and risk, ethicalimplications for all stakeholders.