CALCULATOR BACK Waterways Continuing Problem 12 a Waterways puts much emphasis on cash flow when it plans for capital investments. The company choses discount rate of based on the rate of return it must par its owners and creditors Using that rate, Waterways then uses different methods to determine the best decisions for making capital outlays. This year Waterways is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, cost less to run, provide for more accurate trench diging have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require consideratie maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes The following information is available to use in deciding whether to purchase the new backhoes Old Backhoes New Backhoes Purchase cost when new $88.900 1201,970 Salvage value now $42,100 Investment in major overhaut needed in next year $55,449 Salvage value in 8 years $15,300 560,000 Remaining lite 8 years year Net cash flow generated each year $30,300 543,800 Click here to view Pytable () Evaluate in the following ways whether to purchase the new equipment covered the old equipment. (Point: For the old machine, the initial investiert is the cost of the overhaul. For the new machine, subtract the salvage value of the old machine to determine the initial cost of the investment.) (1) Using the net present value method for buying new or keeping the old (For calculation purposes, use 5 decimal places as displayed in the factor table provided. If the nel present value is negative, use either a negative in preceding the number -15 or parentheses eg (45). Round inal answer to decimal places, .. 5.275.) New Backhoes Old Backhoes Net Present Value signment ES CALCULATOH FULL SCREEN New Backhoes Old Backhoes Net Present Value $ $ dy Waterways should equipment (2) Using the payback method for each choice. (Hint: For the old machine, evaluate the payback of an overhaul.) (Round answers to 2 decimal places, ... 1.28) New Backhoes Payback Period Old Backhoes years years Waterways should equipmen (3) Comparing the profitability index for each choice. (Round answers to 2 decimal places, e.g. 1.25) New Backhoes Old Backhoes Profitability Index equipment. Waterways should Calculate the internal rate of return factor for the new and old blackhoes (Round answers to 5 decimal places, e.. $.27647.) CALCULATOR FULL SCREEN PRINTE (3) Comparing the profitability index for each choice. (Round answers to 2 decimal places, 0.9, 1.25) Old Backhoes Profitability Index New Backhoes Waterways should equipment Calculate the internal rate of return factor for the new and old blackhoes. (Round answers to 5 decimal places, 0.9. 5.27647.) New Backhoes Old Backhoes IRR Factor (4) Comparing the internal rate of return for each choice to the required 8% discount rate. Waterways should equipment LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT Question Attempts: o of used SAVE POR LA
