4 E11-11 (Static) Using NPV to Evaluate Mutually Exclusive Projects (LO 11-5) 2 points Tulsa Company is considering investing in new bottling equipment and has two options: Option A has a lower initial cost but would require a significant expenditure to rebuild the machine after four years: Option has higher maintenance costs, but also has a higher salvage value at the end of its useful life. Tulsa's cost of capital is 11 percent. The following estimates of the cash flows were developed by Tulsa's controller: 8 04:17:08 Initial investment Annual cash inflows Annual cash outflows Costs to rebuild Salvage value Estimated useful life Option Option $ 320,000 $ 454,000 150,000 160,000 70,000 75,000 120,000 0 0 24,000 8 years 8 years Required: Calculate NPV. (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your "Present Values" to the nearest whole dollar amount.) 4 Required: Calculate NPV. (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your "Present Values" to the nearest whole dollar amount.) 2 paints 8 04:16:47 Answer is not complete. Option A Year Cash Flows Present Value PV factor 11% 0 1-8 $ Initial Investment Annual Cash Flows Cost to Rebuild Salvage Net Present Value (320,000) 80,000 (120,000) (320,000) 411,690 (79,048) 5.1460 s 0.6590 0.43403 $ 4 8 12,642 Option : Year Cash Flows Present Value PV factor 11% 0 1-8 (454,000) 85,000 (454,000) 437.420 $ Initial Investment Annual Cash Flows Cost to Rebuild Salvage Net Present Value 4 5.1460 $ 0.6590 0.4340 $ 8 24,000 10,414 (6,165) TABLE 11.1A Future Value of $1 6% 8% Periods 2% 7% 3% 4% 5% 3.75% 4.25% 10000 0 10000 10000 10000 10000 10000 10000 10000 10000 10500 1 10200 10300 10375 10400 10425 10600 10700 10800 10868 11236 2 11025 11449 1.1664 10404 10609 1.0764 10816 3 1.0612 1.0927 11168 12597 11249 11330 11576 11910 12250 4 10824 11255 11587 13605 11699 11811 12155 13108 12625 11041 11593 12021 12167 12313 12763 1.4693 13382 14026 5 6 11262 11941 15869 13401 12472 12653 12837 14185 15007 7 13382 12299 12939 13159 11487 14071 15036 17138 16058 8 11717 12668 13425 13686 13951 14775 15938 18509 17182 9 11951 13048 13928 14233 14544 1.5513 16895 19990 18385 10 16289 12190 13439 1.4450 1.4802 15162 17906 2.1589 19672 20 4.6610 14859 38697 18061 20882 21911 2.2989 26533 3.2071 9% Periods 10% 11% 12% 13% 14% 15% 20% 25% 0 10000 10000 10000 10000 10000 10000 10000 1.0000 10000 1 10900 11000 11100 11200 11300 11400 1.1500 12000 12500 2 11881 12100 12321 12544 12769 12996 13225 14400 15625 3 12950 13310 13676 1404914429 14815 1.5209 17280 19531 4 14116 14641 15181 15735 16305 16890 17490 2.0736 24414 5 1538616105 16851 17623 18424 19254 20114 2.4883 3.0518 6 16771 17716 18704 19738 20820 2.1950 2 3131 2.9860 38147 7 18280 19487 2.0762 22107 2.3526 25023 26600 3.5832 47684 8 19926 2.1436 2.3045 2.4760 26584 28526 3.0590 4.2998 5.9605 9 21719 23579 25580 27731 3.0040 3.2519 3.5179 5.1598 74506 10 23674 2593728394 31058 33946 3707240456 6.1917 9.3132 20 5.6044 67275 8.0623 96463 115231 137435 16 3665 38 3376 867362 TABLE 11. 2A Present Value of $1 Periods 2% 3% 3.75% 45 4.25% 5% 8% 6% 7% 1 0.9804 0.970909639 09615 0.9592 0.9524 0.9434 09346 0.9259 2 0.9612 0.9426 0.9290 0.9246 0.9201 0.9070 0.8900 0.8734 0.8573 3 0.9423 0.9151 0.8954 0.8890 0.8826 0.8638 0.8396 0.8163 0.7938 4 0.9238 0.88850.8631 08548 0.8466 0.8227 0.7921 07629 07350 5 0.9057 0.8626 0.8319 08219 0.8121 0.7835 0.7473 07130 06806 6 0.8880 0.8375 08018 07903 07790 0.7462 0.7050 06663 06302 7 0870608131 07728 07599 07473 07107 06651 06227 0.5835 8 0.8535 07894 07449 07307 07168 06768 06274 0.5820 0.5403 9 10 0.8368 07664 0.7180 07026 0.6876 06446 05919 0.5439 0.5002 08203 07441 0.6920 06756 0.6595 0.6139 0.5584 0.5083 04632 06730 05537 0.4789 04564 0.4350 03769 03118 02584 02145 20 Periods 9% 10% 11% 12% 13% 14% 15% 20% 25% 1 09174 0.9091 0.9009 0.8929 08850 0.8772 0.869608333 08000 2 0.8417 0.8264 0.8116 0.7972 0.7831 07695 0756106944 0.6400 3 07722 0.7513 07312 07118 0.6931 0.6750 0.6575 0.5787 0.5120 4 07084 0683006587 06355 0.6133 0.5921 0.5718 04823 04096 5 0 6499 06209 0.5935 0.5674 0.5428 0.5194 0.4972 0.4019 0.3277 6 0.5963 05645 0.5346 0.5066 0.4803 0.4556 0.4323 0.3349 02621 7 05470 0.5132 0.4817 0.4523 04251 03996 0.3759 0.2791 0.2097 8 0.5019 0.4665 04339 0.4039 0.3762 0.3506 03269 0.2326 0.1678 9 0.4604 04241 0 3909 0.3606 03329 03075 0.2843 0.1938 0.1342 10 04224 0.3855 03522 0.3220 0.2946 0.2697 0.2472 0.1615 0.1074 20 01784 0.1486 01240 0.1037 0.0868 0.0728 0.0611 0.0261 00115 TABLE 11.3A Future Value of an Annuity of $1 Periods 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 1 1.0000 10000 10000 10000 10000 1.0000 10000 1 0000 10000 2 2.0200 20300 2.0375 2.0400 20425 20500 20600 2.0700 2.0800 3 3.0604 3.0909 3.1139 3.1216 31293 31525 3.1836 3.2149 3.2464 4 4.1216 4.1836 42307 4.2465 4.2623 4.3101 4.3746 4.4399 4.5061 5 5.2040 5.3091 53893 5.4163 5.4434 5.5256 5.6371 57507 5.8666 6 6.3061 6.4684 6.5914 6.6330 6.6748 6.8019 6.9753 71533 73359 7 74343 7.6625 7.8386 7.8983 79585 8.1420 8.3938 8.6540 8.9228 8 8.5830 8.8923 91326 9.2142 92967 9.5491 9.8975 10.2598 10.6366 9 9.7546 10.1591 10.4750 10.5828 10,6918 110266 11.4913 11.9780 12.4876 10 10.9497 11.4639 11.8678 12.0061 12.1462 12.5779 13.1808 13.8164 14.4866 20 24.2974 26.8704 29.0174 29.7781 30.5625 33,0660 36.7856 40.9955 45.7620 Periods 9% 10% 11% 12% 13% 14% 15% 20% 25% 1 1.0000 10000 1.0000 1.0000 1.0000 10000 10000 1.0000 10000 2 20900 2.1000 21100 2.1200 21300 2 1400 2.1500 2.2000 2 2500 3 3.2781 3.3100 3 3421 3.3744 3.4069 3.4396 3.4725 3.6400 3.8125 4 4.5731 4.6410 4.7097 4.7793 4.8498 4.9211 4.9934 5.3680 5.7656 5 5.9847 6 1051 6.2278 6,3528 6.4803 6.6101 6.7424 74416 8.2070 6 7.5233 77156 7.9129 8.1152 8.3227 8.5355 8.7537 9.9299 112588 7 9.2004 9.4872 9.7833 10.0890 10.4047 10.7305 11.0668 12.9159 15.0735 8 110285 11.4359 118594 12 2997 127573 13.2328 13.7266 16 4991 19.8419 9 13.0210 13.5975 14 1640 14.7757 15,4157 16 0853 16.7856 20.7989 25 8023 10 15.1929 15.9374 16.7220 17.5487 18.4197 19.3373 20.3037 25.9587 33.2529 20 51.1601 57.2750 64.2028 72.0524 80.9468 910249 102 4436 186.6880 342.9447 There is no payment och period TABLE 11.4A Present Value of Annuity of $1 2% Periods 3% 3.75% 4% 4.25% 5% 6% 7% 8% 1 0.9804 0.9709 0.9639 0.9615 0.9592 0.9524 0.9434 09346 09259 2 19416 19135 18929 1.8861 18794 18594 1.8334 1 8080 17833 3 2.8839 2.8286 27883 27751 27620 27232 2.6730 26243 25771 4 3.8077 37171 3.6514 3.6299 36086 3.5460 3.4651 33872 3 3121 un 4.7135 4.5797 44833 4.4518 4.4207 43295 42124 4.1002 3.9927 6 5.6014 5.4172 5.2851 5.2421 5.1997 5.0757 4.9173 47665 4.6229 7 6.4720 6.2303 6.0579 6.0021 5 9470 5.7864 5.5824 53893 5.2064 00 73255 70197 6.8028 6.7327 6.6638 6.4632 62098 5.9713 5.7466 9 81622 77861 75208 7.4353 73513 71078 6.8017 6.5152 62469 10 8 9826 8.5302 8 2128 8.1109 8 0109 77217 73601 70236 6.7101 20 16.3514 14.8775 13.8962 13.5903 13.2944 12.4622 11.4699105940 9,8181 Periods 9% 10% 11% 12% 13% 14% 15% 20% 25% 1 0.9174 0.9091 0.9009 0.8929 0.8550 0.8772 0.8696 0.8333 0.8000 17591 17355 17125 1.6901 16681 16467 16257 15278 14400 2 3 2.5313 24869 2.4437 24018 23612 23216 228 2.1065 1.9520 4 3.2397 3.1699 3.1024 3.0373 2.9745 29137 28550 25887 2 3616 5 3.8897 37908 3.6959 36048 35172 3.4331 33522 2 9906 26893 6 4.4859 4.3553 42305 4.1114 3.9975 3.8887 3.7845 3.3255 2.9514 7 50330 48684 47122 4.5638 4.4226 42883 41604 3.6046 3.1611 00 5.5348 53349 5.1461 4.9676 47988 4.6389 4.4873 3 8372 3.3289 9 5.9952 57590 5.5370 5.3282 51317 49464 4.7716 4.0310 3.4631 10 64177 6.1446 5.8892 5.6502 5.4252 5.2161 5.0188 4 1925 35705 20 9.1285 8.5136 7.9633 74694 70248 66231 6.2593 4.8696 3.9539 There is one payment och period