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Congratulations! You've won a state lotto! The state lottery offers you the following (after-tax) payout options: (Click the icon to view the payout options.) (Click the icon to view the present value factor table.) (Click the icon to view the present value annuity factor table.) (Click the icon to view the future value factor table.) (Click the icon to view the future value annuity factor table.) Requirement Assuming that you can earn 6% on your funds, which option would you prefer? (Round your answers to the nearest whole dollar.) Calculate the present value for each payout. Data Table Option #1: $15,000,000 six years from now Option #2: $2,200,000 at the end of each year for the next five years Option #3: $12,000,000 four years from now Print Done Bevil Industries is deciding whether to automate one phase of its production process. The manufacturing equipment has a six-year life and will cost $915,000. Projected net cash inflows are as follows: E (Click the icon to view the projected net cash inflows.) (Click the icon to view the present value table.) (Click the icon to view the present value annuity table.) (Click the icon to view the future value table.) 2 (Click the icon to view the future value annuity table.) Read the requirements. Requirements - X Data Table net present values.) Year 1 $261,000 Year 2 $252,000 1. Compute this project's NPV using Bevil Industries' 14% hurdle rate. Should the company invest in the equipment? Why or why not? 2. Bevil Industries could refurbish the equipment at the end of six years for $104,000. The refurbished equipment could be used one more year, providing $75,000 of net cash inflows in Year 7. In addition, the refurbished equipment would have a $50,000 residual value at the end of Year 7. Should Bevil Industries invest in the equipment and refurbish it after six years? Why or why not? (Hint: In addition to your answer to Requirement 1, discount the additional cash outflow and inflows back to the present value.) Year 3 Year 4 Year 5 $222,000 $215,000 $200,000 Year 6 $175,000 Print Done Print Done Congratulations! You've won a state lotto! The state lottery offers you the following (after-tax) payout options: (Click the icon to view the payout options.) (Click the icon to view the present value factor table.) (Click the icon to view the present value annuity factor table.) (Click the icon to view the future value factor table.) (Click the icon to view the future value annuity factor table.) Requirement Assuming that you can earn 6% on your funds, which option would you prefer? (Round your answers to the nearest whole dollar.) Calculate the present value for each payout. Data Table Option #1: $15,000,000 six years from now Option #2: $2,200,000 at the end of each year for the next five years Option #3: $12,000,000 four years from now Print Done Bevil Industries is deciding whether to automate one phase of its production process. The manufacturing equipment has a six-year life and will cost $915,000. Projected net cash inflows are as follows: E (Click the icon to view the projected net cash inflows.) (Click the icon to view the present value table.) (Click the icon to view the present value annuity table.) (Click the icon to view the future value table.) 2 (Click the icon to view the future value annuity table.) Read the requirements. Requirements - X Data Table net present values.) Year 1 $261,000 Year 2 $252,000 1. Compute this project's NPV using Bevil Industries' 14% hurdle rate. Should the company invest in the equipment? Why or why not? 2. Bevil Industries could refurbish the equipment at the end of six years for $104,000. The refurbished equipment could be used one more year, providing $75,000 of net cash inflows in Year 7. In addition, the refurbished equipment would have a $50,000 residual value at the end of Year 7. Should Bevil Industries invest in the equipment and refurbish it after six years? Why or why not? (Hint: In addition to your answer to Requirement 1, discount the additional cash outflow and inflows back to the present value.) Year 3 Year 4 Year 5 $222,000 $215,000 $200,000 Year 6 $175,000 Print Done Print Done
