Denny Inc enjoys a steady demand for stainless steel infiltrators used in a number of chemical processes. Revenues
from the infiltrator division are $45 million a year and production costs are $42 million. However, the 10 high-precision Munster stamping machines used in the production process are coming to the end of their useful life. One possibility is simply to replace each existing machine with a new Munster. These machines would cost $500,000 each and would not involve any additional operating costs. The alternative is to buy 10 centrally controlled Skilboro stampers. Skilboros cost $0.9 million each, but unlike the Munster they would produce a total saving in operator and material costs of $300,000 a year. Moreover, the Skilboro is sturdily built and would last 10 years, as against an estimated 7-year life for the Munster.
Show The Calculation of NPV ,IRR and Payback period of both MUnster and skilboro and tell which is more beneficial ?
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