Dixie Dynamite Company is evaluating two methods of blowing up old buildings for commercial purposes over the
Question:
Dixie Dynamite Company is evaluating two methods of blowing up old buildings for commercial purposes over the next five years. Method one (implosion) is relatively low in risk for this business and will carry a 12 percent discount rate. Method two (explosion) is less expensive to perform but more dangerous and will call for a higher discount rate of 16 percent. Either method will require an initial capital outlay of $107,000. The inflows from projected business over the next five years are shown next.
Years Method 1 Method 2
1 $ 34,100 $ 19,700
2 37,900 31,500
3 39,900 40,500
4 39,700 38,800
5 24,400 77,000
Calculate your final answers using the formula and financial calculator methods.
What is the net present value for Method 1 and Method 2? (Do not round intermediate calculations and round your answers to 2 decimal places.)