Calculate: Present Value of Period Cash Flows at the hurdle rate, Net Present Value at Hurdle Rate, Internal Rate of Return, Profitability Index, and the Payback Period (Nominal and DCF)

Data Set:

Project Life: 6 years

Cost of Press: 1,550,000

Site Preperation for Press: 125,000

Contractor Set-Up: 42,000

Total Initial Investment: 1,717,000

Residual Value: 140,000

Sale of Old Press: 30,000

Hurdle Rate = Discount Rate: 16%

Wage Rate per Hour: $24

Base Wage Fringe Benefits: 50%

Number of Shifts: 2

Savings per Shift New Press: 6 employees

Year 1 - % of Savings Realized (Year 2 and after get 100%): 70%

Normal Work Hours per Year: 1,800

New Press Maintenance Cost Year 1: 12% of press cost

Increase in Maintenance Cost per Year for Year 2 and Forward: 4% of prior year

Tax Rate: 40%

Existing Old Press Maintenance $ per year: 65,000

Eliminate old press Total OT premium (50% of wage) due to press downtime: 200 hours

OT Fringe Benefits: 15% less than base wage fringes