Each investment requires $ 80,000. The committee has selected a rate
of 15% as an appropriate hurdle rate for project selection purposes.
			Present Value							Present Value of
			Factor for			Net Cash Inflows				Net Cash Inflows
	Year		$1 at 15%		Ford F-450		Combine		Ford F-450		Combine
	1		0.87		$ 22,000		$ 29,000
	2		0.756		25,000		26,000
	3		0.658		26,000		24,000
	4		0.572		24,000		24,000
	5		0.497		27,000		19,000
	Total				$ 124,000		$ 122,000
	Amount to be invested								$ (80,000)		$ (80,000)
	Net Present Value

1

Complete the PV Excel worksheet

B E H 1 K L M N D F G 6 Problem #11 7 The capital investment committee of Rankin Ranch FarmingLLC is currently 3 considering two investment opportunities; a new Ford F-450 Pick-up truck and a new International Harvester Combi Budgeting constraints will o allow for only one of the above to be purchased this fiscal year. The cost 1 savings of the two will be compared and the best saver will be purchased this 2 fiscal year. Using Present Value Analysis 3 4 Each investment requires $ 80,000. The committee has selected a rate 5 of 15% as an appropriate hurdle rate for project selection purposes. 6 Present Value 7 Factor for Net Cash Inflows B Year $1 at 15% Ford F-450 Combine 9 Present Value of Net Cash Inflows Ford F-450 Combine 20 1 2 21 2 23 0.87 0.756 0.658 3 $ 22,000 25,000 26,000 24,000 27,000 $ 124,000 4 0.572 $ 29,000 26,000 24,000 24,000 19,000 $ 122,000 24 0.497 5 Total Amount to be invested Net Present Value 26 27 $ (80,000) $ (80,000) Required: 1 Complete the PV Excel worksheet 2 Why is the NPV of the Combine greater than the truck? 3 which alternative will Rankin Ranch Farming LLC choose for this fiscal year