Colston Manufacturing, Inc. has a manufacturing machine that needs attention. (Click the icon to view additional information.) Colston expects the following net cash inflows from the two options: (Click the icon to view the net cash flows.) Colston uses straight-line depreciation and requires an annual return of 10%. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. Compute the payback, the ARR, the NPV, and the profitability index of these two options. Compute the payback for both options. Begin by completing the payback schedule for Option 1 (refurbish). Data Table Net Cash Outflows Net Cash Inflows Year Amount Invested Annual Accumulated Year Refurbish Current Purchase New Machine 0 $ 2,000,000 Machine More Info 1 1 $ 2 2. 3 3 4 4 The company is considering two options. Option 1 is to refurbish the current machine at a cost of $2,000,000. If refurbished, Colston expects the machine to last another eight years and then have no residual value. Option 2 is to replace the machine at a cost of $4,400,000. A new machine would last 10 years and have no residual value. 5 1,040,000 $ 530,000 400,000 270,000 140,000 140,000 140,000 140,000 5 6 3,840,000 610,000 480,000 350,000 220,000 220,000 220,000 220,000 220,000 220,000 6 7 7 8 Print Done 8 9 10 Requirements $ 2,800,000 $ 6,600,000 Total Print Done 1. Compute the payback, the ARR, the NPV, and the profitability index of these two options. 2. Which option should Colston choose? Why? Print Done Present Value of $1 Periods 2% 0.980 7% 0.935 20% 0.833 1 2 0.961 1% 0.990 0.980 0.971 0.961 0.951 0.694 3% 4% 0.971 0.962 0.943 0.925 0.915 0.889 0.888 0.855 0.863 0.822 5% 0.952 0.907 0.864 0.823 0.784 0.873 6% 0.943 0.890 0.840 0.792 0.747 8% 0.926 0.857 0.794 0.735 0.681 9% 0.917 0.842 0.772 0.708 0.650 10% 0.909 0.826 0.751 0.683 0.621 12% 0.893 0.797 0.712 0.636 0.567 14% 0.877 0.769 0.675 0.592 0.519 15% 0.870 0.756 0.658 0.572 0.497 16% 0.862 0.743 0.641 0.552 0.476 18% 0.847 0.718 0.609 0.516 0.437 w 4 0.942 0.924 0.906 0.816 0.763 0.713 0.579 0.482 0.402 or 6 7 8 0.942 0.933 0.923 0.914 0.905 0.888 0.871 0.853 0.837 0.820 0.837 0.813 0.789 0.766 0.744 0.790 0.760 0.731 0.703 0.676 0.746 0.711 0.677 0.645 0.614 0.705 0.666 0.665 0.623 0.627 0.582 0.592 0.544 0.558 0.508 0.630 0.583 0.540 0.500 0.463 0.596 0.547 0.502 0.460 0.422 0.564 0.513 0.467 0.424 0.386 0.507 0.452 0.404 0.361 0.322 0.456 0.432 0.400 0.376 0.351 0.327 0.308 0.284 0.270 0.247 0.410 0.354 0.305 0.263 0.227 0.370 0.314 0.266 0.225 0.191 0.335 0.279 0.233 0.194 0.162 9 10 11 12 13 14 15 0.896 0.887 0.879 0.870 0.861 0.804 0.788 0.773 0.758 0.743 0.722 0.701 0.681 0.661 0.642 0.650 0.625 0.601 0.577 0.555 0.585 0.557 0.530 0.505 0.481 0.527 0.497 0.469 0.442 0.417 0.475 0.444 0.415 0.388 0.362 0.429 0.397 0.368 0.340 0.315 0.388 0.356 0.326 0.299 0.275 0.350 0.319 0.290 0.263 0.239 0.287 0.257 0.229 0.205 0.183 0.237 0.208 0.182 0.160 0.140 0.215 0.187 0.163 0.141 0.123 0.195 0.168 0.145 0.125 0.108 0.162 0.137 0.116 0.099 0.084 0.135 0.112 0.093 0.078 0.065 16 17 18 19 20 0.853 0.844 0.836 0.828 0.728 0.714 0.700 0.686 0.673 0.623 0.605 0.587 0.570 0.554 0.534 0.513 0.494 0.475 0.456 0.458 0.436 0.416 0.396 0.377 0.394 0.371 0.350 0.331 0.312 0.339 0.317 0.296 0.277 0.258 0.292 0.270 0.250 0.232 0.215 0.252 0.231 0.212 0.194 0.178 0.218 0.198 0.180 0.164 0.149 0.163 0.146 0.130 0.116 0.123 0.108 0.095 0.083 0.073 0.107 0.093 0.081 0.070 0.061 0.093 0.080 0.069 0.060 0.051 0.071 0.060 0.051 0.043 0.037 0.054 0.045 0.038 0.031 0.820 0.104 0.026 21 22 23 24 25 0.811 0.803 0.795 0.788 0.780 0.660 0.647 0.634 0.622 0.610 0.538 0.522 0.507 0.492 0.478 0.439 0.422 0.406 0.390 0.375 0.359 0.342 0.326 0.310 0.295 0.294 0.278 0.262 0.247 0.233 0.242 0.226 0.211 0.197 0.184 0.199 0.184 0.170 0.158 0.146 0.164 0.150 0.138 0.126 0.116 0.135 0.123 0.112 0.102 0.092 0.093 0.083 0.074 0.066 0.059 0.064 0.056 0.049 0.043 0.038 0.053 0.046 0.040 0.035 0.030 0.044 0.038 0.033 0.028 0.024 0.031 0.026 0.022 0.019 0.016 0.022 0.018 0.015 0.013 0.010 26 27 28 29 30 0.772 0.764 0.757 0.749 0.742 0.598 0.586 0.574 0.563 0.464 0.450 0.437 0.424 0.412 0.361 0.347 0.333 0.321 0.308 0.281 0.268 0.255 0.243 0.231 0.220 0.207 0.196 0.185 0.174 0.172 0.161 0.150 0.141 0.131 0.135 0.125 0.116 0.107 0.099 0.106 0.098 0.090 0.082 0.075 0.084 0.076 0.069 0.063 0.057 0.053 0.047 0.042 0.037 0.033 0.033 0.029 0.026 0.022 0.020 0.026 0.023 0.020 0.017 0.015 0.021 0.018 0.016 0.014 0.012 0.014 0.011 0.010 0.008 0.007 0.009 0.007 0.006 0.005 0.004 0.552 40 0.672 0.453 0.307 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.011 0.005 0.004 0.003 0.001 0.001 50 0.608 0.372 0.228 0.141 0.087 0.054 0.034 0.021 0.013 0.009 0.003 0.001 0.001 0.001 Present Value of Ordinary Annuity of $1 Periods 1 2 10% 0.909 1.736 2.487 3.170 3.791 12% 0.893 1.690 2.402 3.037 3.605 14% 15% 0.877 0.870 1.647 1.626 2.322 2.283 2.914 2.855 3.433 3.352 16% 0.862 1.605 2.246 2.798 3.274 18% 0.847 1.566 2.174 2.690 3.127 20% 0.833 1.528 2.106 2.589 2.991 3 4 5 6 7 8 9 10 1% 2% 3% 4% 5% 6% 7% 8% 9% 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.061 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 15.562 14.292 13.166 12.166 11.274 10.477 9.763 9.122 8.544 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 17.226 15.678 14.324 13.134 | 12.085 11.158 10.336 9.604 8.950 18.046 16.351 14.877 13.590 12.462 11.470 10.594 | 9.818 9.129 4.355 4.868 5.335 5.759 6.145 4.111 4.564 4.968 5.328 5.650 3.889 4.288 4.639 4.946 5.216 3.784 4.160 4.487 4.772 5.019 3.685 4.039 4.344 4.607 4.833 3.498 3.812 4.078 4.303 4.494 3.326 3.605 3.837 4.031 4.192 11 12 13 14 15 6.495 6.814 7.103 7.367 7.606 5.938 6.194 6.424 6.628 6.811 5.453 5.660 5.842 6.002 6.142 5.234 5.421 5.583 5.724 5.847 5.029 5.197 5.342 5.468 5.575 4.656 4.793 4.910 5.008 5.092 4.327 4.439 4.533 4.611 4.675 16 17 18 19 20 7.824 8.022 8.201 8.365 8.514 6.974 7.120 7.250 7.366 7.469 6.265 6.373 6.467 6.550 6.623 5.954 6.047 6.128 6.198 6.259 5.669 5.749 5.818 5.877 5.929 5.162 5.222 5.273 5.316 5.353 4.730 4.775 4.812 4.844 4.870 21 22 23 24 25 18.857 17.011 15.415 14.029 12.821 11.764 10.836 10.017 9.292 19.660 17.658 15.937 14.451 13.163 12.042 11.061 10.2019.442 20.456 18.292 16.444 14.857 13.489 12.303 11.272 10.371 9.580 21.243 18.914 16.936 15.247 13.799 12.550 11.469 10.529 9.707 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 9.823 8.649 8.772 8.883 8.985 9.077 7.562 7.645 7.718 7.784 7.843 6.044 5.384 5.410 5.432 5.451 5.467 4.891 4.909 4.925 4.937 4.948 6.687 6.312 5.973 6.743 6.359 6.011 6.792 6.399 6.835 6.434 6.073 6.873 6.464 6.097 6.906 6.491 6.118 6.935 6.514 6.136 6.961 6.534 6.152 6.983 6.551 6.166 7.003 6.566 6.177 26 27 28 29 30 22.795 20.121 | 17.87715.983 14.375 13.003 11.826 10.810 9.929 9.161 23.560 20.707 18.327 16.330 14.643 13.211 | 11.987 10.935 10.027 9.237 24.316 21.28118.764 16.663 14.898 13.406 12.137 11.051 10.116 9.307 25.066 21.844 19.188 16.984 15.141 13.591 | 12.278 11.158 10.1989.370 25.808 22.396 19.600 17.292 15.372 13.765 12.409 11.258 10.274 9.427 7.896 7.943 7.984 8.022 8.055 5.480 5.492 5.502 5.510 5.517 4.956 4.964 4.970 4.975 4.979 40 32.835 27.355 23.115 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.244 7.105 6.642 6.233 5.548 4.997 50 39.196 31.424 25.730 21.482 18.256 15.762 13.801 | 12.233 10.962 9.915 8.304 7.133 6.661 6.246 5.554 4.999 Future Value of $1 Periods - 2 3 4 5 1% 1.010 1.020 1.030 1.041 1.051 2% 1.020 1.040 1.061 1.082 1.104 13% 1.030 1.061 1.093 1.126 1.159 4% 1.040 1.082 1.125 1.170 1.217 5% 1.050 1.103 1.158 1.216 1.276 6% 1.060 1.124 1.191 1.262 1.338 17% 1.070 1.145 1.225 1.311 1.403 8% 1.080 1.166 1.260 1.360 1.469 19% 1.090 1.188 1.295 1.412 1.539 10% 1.100 1.210 1.331 1.464 1.611 12% 1.120 1.254 1.405 1.574 1.762 14% 1.140 1.300 1.482 1.689 1.925 15% 1.150 1.323 1.521 1.749 2.011 66 7 8 9 10 1.062 1.072 1.083 1.094 1.105 1.126 1.149 1.172 1.195 1.219 1.772 1.949 2.144 2.358 2.594 1.974 2.211 2.476 2.773 3.106 2.195 2.502 2.853 3.252 3.707 2.313 2.660 3.059 3.518 4.046 11 12 13 14 15 1.116 1.127 1.138 1.149 1.161 1.243 1.268 1.294 1.319 1.346 1.194 1.265 1.340 1.419 1.501 1.587 1.677 1.230 1.316 1.407 1.504 1.606 1.714 1.828 1.267 1.369 1.477 1.594 1.718 1.851 1.993 1.305 1.423 1.551 1.689 1.838 1.999 2.172 1.344 1.480 1.629 1.791 1.967 2.159 2.367 1.384 1.539 1.710 1.898 | 2.105 2.332 | 2.580 1.426 1.601 1.796 | 2.012 2.252 2.518 2.813 1.469 1.665 1.886 2.133 2.410 2.720 3.066 1.513 1.732 1.980 2.261 2.579 2.937 13.342 1.558 1.801 2.079 2.397 2.759 3.172 3.642 1.605 1.873 2.183 | 2.540 12.952 | 3.426 3.970 1.653 1.948 2.292 2.693 3.159 3.700 4.328 1.702 2.026 | 2.407 | 2.854 3.380 3.996 | 4.717 1.754 2.107 2.527 3.026 | 3.617 4.316 5.142 1.806 | 2.191 2.653 3.207 3.870 4.66115.604 2.853 3.138 3.452 3.798 4.177 3.47 4.226 3.896 4.818 4.363 5.492 4.887 6.261 5.474 | 7.138 4.652 5.350 6.153 7.076 8.137 16 17 18 19 20 1.173 1.184 1.196 1.208 1.220 1.373 1.400 1.428 1.457 1.486 4.595 5.054 5.560 6.116 6.727 6.130 6.866 7.690 8.613 9.646 8.137 9.276 10.58 12.06 13.74 9.358 10.76 12.38 14.23 16.37 21 22 23 24 25 1.232 1.245 1.257 1.270 1.282 1.516 1.546 1.577 1.608 1.641 1.860 | 2.279 | 2.786 13.400 | 4.141 1.916 2.370 | 2.925 3.604 14.430 1.974 2.465 3.072 3.820 ] 4.741 2.033 2.563 3.225 4.049 5.072 2.094 2.666 3.386 4.292 5.427 5.034 5.437 5.871 6.341 6.848 6.109 6.659 7.258 7.911 8.623 7.400 8.140 8.954 9.850 10.83 10.80 | 15.67 12.10 17.86 13.55 20.36 15.18 23.21 17.00 26.46 18.82 21.64 24.89 28.63 32.92 26 27 28 29 30 1.295 1.308 1.321 1.335 1.348 1.673 1.707 1.741 1.776 1.811 2.157 2.221 2.288 2.357 2.427 2.772 3.556 4.549 5.807 7.396 2.883 | 3.733 | 4.822 6.214 17.988 2.999 3.920 5.112 6.649 8.627 3.119 4.116 5.418 7.114 9.317 3.243 4.322 5.743 | 7.612 4.801 7.040 10.29 14.97 21.72 7.107 11.47 18.42 29.46 46.90 9.399 10.25 11.17 12.17 13.27 11.92 13.11 14.42 15.86 17.45 19.04 30.17 21.32 | 34.39 23.88 39.20 26.75] 44.69 29.96 50.95 37.86 43.54 50.07 57.58 66.21 10.06 40 1.489 2.208 3.262 31.41 45.26 93.05 188.9 267.9 50 1.645 2.692 4.384 74.36 117.4 289.0 700.2 1,084 Periods 1 2 3 4 5 1% 1.000 2.010 3.030 4.060 5.101 2% 1.000 2.020 3.060 4.122 5.204 10% 12% 14% 1.000 1.000 1.000 2.100 2.120 2.140 3.310 3.374 3.440 4.641 4.779 4.921 6.105 6.353 6.610 15% 1.000 2.150 3.473 4.993 6.742 6 7 8 9 10 6.152 6.308 7.214 7.434 8.286 8.583 9.369 9.755 10.46 10.95 7.716 8.115 9.487 10.09 11.44 12.30 13.58 14.78 15.94 17.55 8.536 10.73 13.23 16.09 19.34 8.754 11.07 13.73 16.79 20.30 11 12 13 14 15 11.57 12.68 13.81 14.95 16.10 12.17 13.41 14.68 15.97 17.29 Future Value of Ordinary Annuity of $1 3% 4% 5% 6% 7% 8% 9% 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2.030 2.040 2.050 2.060 2.070 2.080 2.090 3.091 3.122 3.153 3.184 3.215 3.246 3.278 4.184 4.246 4.310 4.375 4.440 4.506 4.573 5.309 5.416 5.526 5.637 5.751 5.867 5.985 6.468 6.633 6.802 6.975 7.153 7.336 7.523 7.662 7.898 8.142 8.394 8.654 8.923 9.200 8.8929.214 9.549 9.897 10.260 10.64 11.03 10.16 10.58 11.03 11.49 11.98 12.49 13.02 11.46 12.01 12.58 13.18 13.82 14.49 15.19 12.81 13.49 14.21 14.97 15.78 16.65 17.56 14.19 15.03 15.92 16.87 17.89 18.98 20.14 15.62 16.63 17.71 18.88 20.14 21.50 22.95 17.09 18.29 19.60 21.02 22.55 24.21 26.02 18.60 20.02 21.58 23.28 25.13 27.15 29.36 20.16 21.82 23.66 25.67 27.89 30.32 33.00 21.76 23.70 25.84 28.21 30.84 33.75 36.97 23.41 25.65 28.13 30.91 34.00 37.45 41.30 25.12 27.67 30.54 33.76 37.38 41.45 46.02 26.87 29.78 33.07 36.79 41.00 45.76 51.16 28.68 31.97 35.72 39.99 44.87 50.42 56.76 30.54 34.25 38.51 43.39 49.01 55.46 62.87 32.45 36.62 41.4347.00 53.44 60.89 69.53 34.43 39.08 44.50 50.82 58.18 66.76 76.79 36.46 41.65 47.73 54.86 63.25 73.11 84.70 18.53 21.38 24.52 27.98 31.77 20.65 24.13 28.03 32.39 37.28 23.04 27.27 32.09 37.58 43.84 24.35 29.00 34.35 40.50 47.58 16 17 18 19 20 35.95 40.54 45.60 51.16 57.28 42.75 48.88 55.75 63.44 72.05 50.98 55.72 59.12 65.08 68.39 75.84 78.97 88.21 91.02 102.4 17.26 18.64 18.43 20.01 19.61 21.41 20.81 22.84 22.02 24.30 23.24 25.78 24.47 27.30 25.72 28.85 26.97 30.42 28.24 32.03 21 22 23 24 25 64.00 71.40 79.54 88.50 98.35 81.70 92.50 104.6 118.2 133.3 104.8 120.4 138.3 158.7 181.9 118.8 137.6 159.3 184.2 212.8 26 27 28 29 30 29.53 30.82 32.13 33.45 34.78 33.67 35.34 37.05 38.79 40.57 38.55 44.31 51.11 59.16 40.71 47.08 54.6763.71 42.93 49.97 58.40 68.53 45.22 52.97 62.32 73.64 47.58 56.08 66.44 79.06 68.68 79.95 74.48 87.35 80.70 95.34 87.35 104.0 94.46 113.3 199.6259.1 93.32 102.7 113.0 124.1 136.3 109.2 150.3 121.1 169.4 134.2 190.7 148.6 214.6 164.5 241.3 208.3 238.5 272.9 312.1 356.8 245.7 283.6 327.1 377.2 434.7 40 48.89 60.40 75.40 95.03 120.8 154.8 337.9 442.6 767.1 1,342 1,779 50 64.46 84.58 112.8 152.7 209.3 290.3 406.5 573.8 815.1 1,164 2,400 4,9957,218