A3 Q 1 g 1. Choo Choo Inc. is a manufacturer of model trains. The company is considering the purchase of an industrial 3D printer, which will allow the firm to produce custom-made model trains for its...

A3 Q 1 g

1. Choo Choo Inc. is a manufacturer of model trains. The company is considering the purchase of an industrial 3D printer, which will allow the firm to produce custom-made model trains for its high-end customers. The printer will cost $2,500,000, and it is expected to produce net cash flows of $600,000 per year for the next six years. Liquidation of the equipment will net the firm $350,000 in cash at the end of six years. The firm requires a 15% rate of return on all investments. Ignore the effects of taxes.

g. Check that at the internal rate of return (IRR) the net present value of the printer is $0. Should the company purchase the printer based on the IRR investment criterion?