Cash Payback Period, Net Present Value Analysis, and Qualitative Considerations The plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $198,000. The manager believes that the new Investment will result in direct labor savings of $66,000 per year for 10 years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4,212 3.791 3.605 3.353 2.991 6 4.917 4355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 B 6.210 5.335 4.968 4.487 3.837 6.802 5.259 5.328 4.772 4.031 10 7360 6.145 5.650 5.019 4.192 3. What is the payback period on this project? Years 9 b. What is the net present value, assuming a 10% rate of return? Use the table provided above Round to the nearest whole dollar. Net present value c. What else should the manager consider in the analysis? Internal Rate of Return Method for a Service Company The Riverton Company, announced a $745,200 milion expansion of lodging properties, skilifts, and terrain in Park City, Utah. Assume that this investment is estimated to produce $120,000 million in equal annual cash flows for each of the first eight years of the project life Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.994 6 4.917 4.355 4.111 3.785 3.326 7 5.52 4.868 4.564 4.160 3.505 6.210 5.335 4.95 4.457 303 6.802 5.799 5320 4.772 4031 10 2.360 6.145 5.650 5.019 4.192 a. Determine the picted internal rate om of this project for not year the entry of above is. Identify the cries that could helt frem of the DOOR Show Me How Calculator Average Rate of Return Method, Net Present Value Method, and Analysis for a service company The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated operating Income and net cash Nows from each Investment are as follows: Front-End Loader Operating Net Cash Income Flow Year 1 $105.000 $34,200 34,200 2 105,000 Greenhouse Operating Net Cash Income How 572,000 $165,000 55,000 142.000 27,000 100,000 12.000 68,000 5,000 47.000 5171.000 $525.000 34,200 34,200 4 5 105,000 105,000 205,000 $525.000 34,200 $171.000 TO LALDO LALGO Each prostries an investment of $360,000 Sheraton Wand no val value exced. The committee has selected a rate of 12 for purposes of the net van Present Value of at Compound Interest Year 64 104 129 159 201 1 0.143 0.900 0.09 0,00 0.833 2 0.190 0.125 0.797 0.75 0.61 3 02 0.66 0679 4 0.792 0. 0636 0.572 5 0.741 012 52 0.492 0402 0.905 0.564 0502 9.32 03) 0.665 0.513 0,376 0.39 AY LO 0.840 51 CEL ALGO 0.00 O MY Previous Next > eBook Show Me How Calculator 3 0.840 0.712 0.658 0.579 0.751 0.683 4 0.792 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.432 0.335 7 0.665 0.513 0.507 0.452 0.404 0.376 0.279 8 0.627 0.467 0.322 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Required: 1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Average Rate of Return Front-End Loader Greenhouse % 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, round to the nearest dollar. If required, use the minus sign to indicate a negative net present value Front-End Loader Greenhouse Present value of net cash flow Amount to be invested Net present Value 5 2. Prepare a brief report for the capital investment committee advising it on the relative merits of the two investments The front end loader represent becausos in time compared to the greenhouse. Thus, only one of the two projects can be accepted, the would be the more attractive Check My Won Previous Net