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can you solve them Example 3: Calculating NPV. Using the cash flows for the tanning bed given in Example 2 above, calculate its NPV and
can you solve them Example 3: Calculating NPV. Using the cash flows for the tanning bed given in Example 2 above, calculate its NPV and indicate whether the investment should be undertaken or not. Example 2: Calculate Discounted Payback Period Calculate the discounted payback period of the tanning bed, stated in Example 1 above, by using a discount rate of 10%. - Example 1 Payback period of a new machine - Let's say that the owner of Perfect Images Salon is considering the purchase of a new tanning bed. - It costs $10,000 and is likely to bring in after-tax cash inflows of $4,000 in the first year, $4,500 in the second year, $10,000 in the 3rd year, and $8,000 in the 4th year. - The firm has a policy of buying equipment only if the payback period is 2 years or less. state whether the owner would buy it or not. Example 4: Calculate NPV for choosing between mutually exclusive projects. The owner of Perfect Images Salon has a dilemma. She wants to start offering tanning services and has to decide between purchasing a tanning bed and a tanning booth. In either case, she figures that the cost of capital will be 10%. The relevant annual cash flows with each option are listed below: Example 7. Calculating IRR with a financial calculator. Using the cash flows for the tanning bed given in Example 1 above calculate its IRR and state your decision. CF0=$10,000;CF1=$4,000;CF2=$4,500;CF3=$10,000;CF4=$8,000Iordiscountrate=10%
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