Question #1 (7.5 marks) ABC Corporation wants to buy a new warehouse inventory system. They expect the savings (cash flows) generated in the next five years to be generated as per Table 1. The value of the inventory system is $70,000 and ABC Corp. cost of capital is 11%. Calculate the Payback, Net Present Value (NPV) and Internal Rate of Return (IRR) of this investment. Based on the three capital budgeting tools, should ABC corporate invest in the warehouse inventory system? Year Cash flows 0 1 10,000 2 25,000 3 30,000 4 20,000 5 2,000 Total 87,000.

1. Question #1 (7.5 marks) ABC Corporation wants to buy a new warehouse inventory system.
They expect the savings (cash flows) generated in the next five years to be generated as per
Table 1. The value of the inventory system is $70,000 and ABC Corp. cost of capital is 11%.
Calculate the Payback, Net Present Value (NPV) and Internal Rate of Return (IRR) of this
investment. Based on the three capital budgeting tools, should ABC corporate invest in the
warehouse inventory system? Year Cash flows 0 1 10,000 2 25,000 3 30,000 4 20,000 5 2,000
Total 87,000