3, amla is the financial advisor for his company and is considering the purchase of excavation equipment which will cost $96,000. The purchase of this equipment is expected to save his company $9,244 at the end of every year for 13 years.At the end of the 13 years, he expects the excavation equipment to have a residual (inflow) value of $13,800. The company requires a 4.7% rate of return.

Round PV to the nearest cent. Round NPV to the nearest whole number.

1) What is the Net Present Value (NPV) of this equipment investment?

Cash Inflows

P/Y =	C/Y =	N =
I/Y =	PMT =	FV =
	PV =

(If the NPV is negative, enter it as a negative number. If the NPV is zero, enter 0.)

NPV =. (round to the nearest dollar)

4) ZIdan is the financial advisor for his company and is considering the purchase of excavation equipment which will cost $70,000. The purchase of this equipment is expected to save his company $8,403 at the end of every year for 10 years. At the end of the 10 years, he expects the excavation equipment to have a residual (inflow) value of $11,700. The company requires a 5.5% rate of return. Round PV to the nearest cent. Round NPV to the nearest whole number.

1. What is the Net Present Value (NPV) of this equipment investment?

Cash Inflows

Cash Inflows	Payments (Savings)	Residual (Inflow)
P/Y =
C/Y =
N =
I/Y =	%	%
PV =	$	$
PMT =	$	$
FV =	$	$

(If the NPV is negative, enter it as a negative number. If the NPV is zero, enter 0

NPV = $

5 ) Enbridge has two options for upgrading a natural gas power station to meet new government standards. Option 1: Enbridge will make the upgrades themselves. This is expected to cost $12,600 at the end of every six months for 13 years. At the end of the operation (in 13 years) Enbridg expects to sell all equipment needed for the upgrade for $109,000. Option 2: Pay experienced contractors. This will cost $35,000 upfront and $11,500 semi-annually for 13 years. Assume all interest is 2.45% compounded semi-annually.

Round the answers to NPV (Option 1), and NPV (Option 2) to the nearest dollar. Round all other answers to two decimal places where applicable.

1) Find the net present value of option 1:

	Payments (Cost)	Sale of equipment (Residual)
P/Y =
C/Y =
N =
I/Y =	%	%
PV =	$	$
PMT =	$	$
FV =	$	$

(If the NPV is negative, enter it as a negative number. If the NPV is zero, enter 0.)

NPV = $

2) Find the net present value of option 2:

	Payments (Cost)
P/Y
C/Y
N
I/Y	%
PV	$
PMT	$
FV	$

(If the NPV is negative, enter it as a negative number. If the NPV is zero, enter 0.) NPV (Option 2) = $

3) Which option should Enbridge choose?

• Option 1
• Option 2
• Either option could be chosen