Answered step by step
Verified Expert Solution
Question
1 Approved Answer
ABC Corporation has a machine that requires repairs or should be replaced. ABC as evaluated the two options and calculated the cash flows resulting from
ABC Corporation has a machine that requires repairs or should be replaced. ABC as evaluated the two options and calculated the cash flows resulting from each option as follows:
Option A: Repair the machine
Year | Cash Flow |
0 | -$60,500.00 |
1 | $15,500.00 |
2 | $33,100.00 |
3 | $17,500.00 |
4 | $17,200.00 |
5 | $10,700.00 |
Option B: Buy a new machine
Year | Cash Flow |
0 | -$355,555.00 |
1 | $53,300.00 |
2 | $123,000.00 |
3 | $113,800.00 |
4 | $122,900.00 |
5 | $120,100.00 |
Requirements:
1a. Compute payback for each option.
1b. Compute IRR for each option.
1c. Compute NPV and PI for each option using discount rates of 9%, 11%, 13%, and 17%
1d. Create an NPV profile chat with R on the x-axis and NPV on the y-axis. (Two lines each, one for NPV A and one for NPV B).
Thank you!
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started