a) Your buddy in mechanical engineering has invented a moneymachine. The main drawback of the machine is that it is slow. Ittakes one year to manufacture $1300. However, once built, themachine will last forever and will require no maintenance. Themachine takes one year to build and it will cost $26000 to build.Your buddy wants to know if he should invest the money to constructit. If the interest rate is 4.0% per year, what should your buddydo? Calculate the NPV. The NPV of the machine is $. (round to thenearest dollar) (b) Your buddy has found a way to improve themachine. Everything else equal as in (a), the amount of producedmoney will increase every year by 1%. Calculate the NPV for thisimproved machine. The NPV of the machine is $. (round to thenearest dollar) (c) Your buddy is interested to know the IRR for(b). The IRR of the machine is %. (round to 2 decimal places)Expert Answer
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