Expected Net Cash Flows per Project Stout Boise $8,000 Year 1 $4,000 $8,000 Year $9,000 $8,000 $13,000 $8,000 $20,000 $8,000 $20,000 $8,000 $18,000 $0 $0 $20,000 $15,000 $10,000 $5,000 Expected Net Cash Flows (Stout) $5,000 $10,000 $15,000 $20,000 Expected Net Cash Flows (Boise) > tableau 1. Compute the net present value of each project. 2. Based on net present values, which project(s) should the company invest in? 3. Assuming the company must choose one project only, compute the profitability index to determine the best project to invest in Compute the net present value of each project. Net Cash Flows Present Value of 1 at 12% Present Value of Net Cash Flows Stout Year 1 Year 2 Year 3 Year 4 Year 5 Totals Amount invested Net present value Boise Year 1 Year 2 Year 3 Year 4 Year 5 Totals Amount invested Net present value Required 1 Required 2 Required 3 Based on net present values, which project(s) should the company invest in? Based on net present values, which project(s) should the company invest in? Assuming the company must choose one project only, compute the profitability index to determine the best project to invest in. Profitability Index Choose Numerator: 1 Choose Denominator: = Profitability Index Profitability index Stout Boise If the company can choose only one project, which should it choose? TABLE B.1 Present Value of 1 p=1/(1+0) Rate Periods 0 0.9901 0.9803 0.9706 0.9610 0.9515 0.9420 0.9327 0.9235 0.9143 0.9053 0.8963 0.8874 0.8787 0.8700 0.8613 0.8528 0.8444 0.8360 0.8277 0.8195 0.7798 0.7419 0.7059 0.6717 0.9804 0.9612 0 0.9423 0.9238 0.9057 0.8880 0.8706 0.8535 0.8368 0.8203 0.8043 0.7885 0.7730 0.75790 0.7430 0.7284 0.7142 0.7002 0.6864 0.6730 0.6095 0.5521 0.5000 0.4529 0.9709 .9426 0.9151 0.8885 0.8626 0.8375 0.8131 0.7894 0.7664 0.7441 0.7224 0.7014 0.6810 6611 0.6419 0.6232 0.6050 0.5874 0.5703 0.5537 0.4776 0.4120 0.3554 0.3066 0.9615 0.9246 0.8890 0.8548 0.8219 0.7903 0.75990 0.7307 0.7026 0.6756 0.6496 0.6246 0.6006 0.5775 0.5553 0.5339 0.5134 .4936 0.4746 0.4564 0.3751 0.3083 0.2534 0.2083 0.9524 0.9070 0.8638 0.8227 0.7835 0.7462 .7107 0.6768 0.6446 0.6139 0.5847 0.5568 0.5303 0.5051 0.5051 0.4810 0.4581 0.4363 0.4155 0.3957 0.3769 0.2953 0.2314 0.1813 0.1420 6% 0.9434 0.8900 0.8396 0.7921 0.7473 0.7050 0.6651 0.6274 0.5919 0.5584 0.5268 0.4970 0.4688 0.4423 0.4423 0.4173 0.3936 0.3714 0.3503 0.3305 0.3118 0.2330 0.1741 0.1301 0.0972 7% 0.9346 0.8734 0.8163 0.7629 0.7130 0.6663 0.6227 0.5820 0.5439 0.5083 0.4751 0.4440 0.4150 0.3878 0.3878 0.3624 0.3387 0.3166 0.2959 0.2765 0.2584 0.1842 0.1314 0.0937 0.0668 8% 0.9259 0.8573 0.7938 0.7350 0.6806 0.6302 0.5835 0.5403 0.5002 0.4632 0.4289 0.3971 0.3677 0.3405 0.3405 0.3152 0.2919 0.2703 0.2502 0.2317 0.2145 0.1460 0.0994 0.0676 0.0460 9% 0.9174 0.8417 0.7722 0.7084 0.6499 0.5963 0.5470 0.5019 0.4604 0.4224 0.3875 .3555 0.3262 0.2992 0.2745 0.2519 0.2311 0.2120 0.1945 0.1784 0.1160 0.0754 0.0490 0.0318 10% 0.9091 0.8264 0.7513 0.6830 0.6209 0.5645 0.5132 0.4665 0.4241 0.3855 0.3505 0.3186 0.2897 0.2633 .2394 0.2176 0.1978 0.1799 0.1635 .1486 0.0923 0.0573 0.0356 0.0221 12% 0.8929 0.7972 0.7118 0.6355 .5674 0.5066 0.4523 0.4039 0.3606 0.3220 0.2875 0.2567 0.2292 0.2046 0.1827 0.1631 0.1456 0.1300 0.1161 0.1037 0.0588 0.0334 0.0189 0.0107 15% 0.8696 0.7561 0.6575 0.5718 0.4972 0.4323 0.3759 0.3269 0.2843 0.2472 0.2149 0.1869 0.1625 0.1413 0.1229 0.1069 0.0929 00808 0.0703 0.0611 0.0304 0.0151 0.0075 0.0037 0 13 0 0 0 Used to compute the present value of a known future amount. For ample: How much would you need to investoday at 10% compounded manually to accumulat 500 in 6 years from today Using the factors of 12 and i = 5% (12 semiannual periods and semiannual me of the actor 0.5568. You would need to rest 52.75 x 5000 x 0.55681 TABLE B.2 Future Value of 1 f=(1+1) Rate Periods 1% 88 9% 90% 12% 15% 1.0000 10000 10000 1.0100 1.0200 1.0300 1.0201 1.0404 1.0609 1.0303 1.0612 1.0927 1.0406 1.0824 1.1255 1.0510 1.1041 1.1593 1.0615 1.1262 1.1941 1.0721 1.1487 1.2299 1.0829 1.1717 1.2668 1.0937 1.1951 1.3048 1.1046 1.21901.3439 1.1157 1.2434 1.3842 1.1268 1.2682 1.4258 1.1381 1.2936 1.4685 1.1495 1.3195 1.5126 1.16101.34591.5580 1.1726 1.3728 1.6047 1.1843 1.4002 1.6528 1.1961 1.42821.7024 1.2081 1.4568 1.7535 1.2202 1.4859 18061 1.2824 1.6406 2.0938 1.3478 1.8114 24273 1.4166 1.999928139 1.4889 2 2080 3.2620 10000 1.0400 1.0816 1.1249 1.1699 1.2167 1.2653 1.3159 1.3686 1.4233 1.4802 1.5395 1.6010 1.6651 1.7317 1.8009 1.8730 1.9479 20258 2.1068 2.1911 2.6658 3.2434 3.9461 4.8010 10000 1.0000 1.0500 1.0600 1.1025 1.1236 1.1576 1.1910 1.2155 1.2625 1.2763 1.3382 1.3401 1.4185 1.4071 1.5036 1.4775 1.5938 1.5513 1.6895 1.7908 1.7103 1.8983 1.7959 20122 1.8856 2.1329 1.9799 2.2609 2.0789 2.3966 2.1829 2.5404 2.2920 2.6928 2.4066 28543 2.5270 3.0256 26533 3.2071 3.3864 4 .2919 4.32195 7435 5.5160 7 6861 7.0400 10.2857 1.0000 1.0700 1.1449 1.2250 1.3108 1.4026 1.5007 1.6058 1.7182 1.8385 1.9672 2.1049 2.2522 2.4098 2 .5785 2.7590 2.9522 3.1588 3.3799 3.6165 3.8697 5.4274 7 .6123 10.6766 14.9745 1.000 1.0800 1.1664 1.2597 1.3605 1.4693 1.5869 1.7138 1.8509 1.9990 2.1589 2.3316 2.5182 2.7196 2.9372 3.1722 3.4259 3.7000 3.9960 4.3157 4.6610 6.8485 10.0627 14.7853 21.7245 1.0000 1.0900 1.1881 1.2950 1.4116 1.5386 1.6771 1.8280 1.9926 2.1719 2.3674 2.5804 28127 3.0658 3.3417 3.6425 3.9703 4.3276 1.0000 1.1000 1.2100 1.3310 1.4641 1.6105 1.7716 1.9487 2.1436 22579 2.5937 2.8531 3.1384 3.4523 3.7975 4.1772 4.5950 5.0545 5.5599 6.1159 6.7275 10.8347 17.4494 28.1024 45.2593 1.0000 1.1200 1.2544 1.4019 1.5735 1.7623 1.9738 2.2107 2.4760 2.7731 3.1058 3.4785 3.8960 4.3635 48871 5.4736 6.1304 6.8660 7.6900 8.6128 9.6463 17.0001 299599 52.7996 93.0510 1.0000 1.1500 1.3225 1.5209 1.7490 2.0114 2.3131 26600 3.0590 35179 4.0456 4.6524 53503 6.1528 7.0757 8.1371 9.3576 10.7613 12.3755 14.2318 16.3665 32.9190 66.2118 133.1755 267.8635 5.1417 5.6044 86231 13.2677 20.4140 31.4094 "Used to compute the future value of a known present amount. Forample: What is the accumulated value of $3.000 invested today compounded quarterly for 5 years Using the factors of s a ndi=2500 quarterly periods and a quarterly interest rate of 251, the factor is 1.4859. The accumulated value is 54,457.705.000X LANS). TABLE B.3: Present Value of an Annuity of 1 Rate Perlods 1% 2% 3% 4% 5% 6% 7% 9% 10% 12% 15% 10 0.9901 0.9804 0.9709 1.9704 1.9416 1.9135 2.9410 2.8839 2.8286 3.9020 3.80773.7171 4.85344.71354.5797 5.7955 5.6014 5.4172 6.7282 6.4720 6.2303 7.6517 7.3255 7,0197 8.5660 8.1622 7.7861 9.4713 8.9826 8.5302 10.3676 9.7868 9.2526 11.2551 10.5753 9.9540 12.1337 11.3484 10.6350 13.0037 12.1062 11.2961 13.8651 12.8493 11.9379 14.7179 13.5777 12.5611 15.5623 14.2919 13.1661 16.3983 14.9920 13.7535 17.2260 15.6785 14.3238 18.0456 16 3514 14.8775 22.0232 19.5235 17.4131 25.8077 22 3965 19.6004 29.4086 24.9986 21.4872 32 8347 27.3555 23.1148 0.9615 1.8861 2.7751 3.6299 4.4518 5.2421 6.0021 6.7327 7.4353 8 .1109 8.7605 9.3851 9.9856 10.5631 11.1184 11.6523 12.1657 12.6593 13.1339 13.5903 15.6221 17.2920 18.6646 19.7928 0.9524 1.8594 2.7232 3.5460 4.3295 50757 5.7864 6.4632 7.1078 7.7217 8.3064 8.8633 9.3936 9.8986 10.3797 10.8378 11.2741 11.6896 12.0853 12.4622 14.0939 15.3725 16.3742 17.1591 0.94340 .9346 0.9259 0.91740.9091 1.8334 1.8080 1.7833 1.7591 1.7355 2.6730 2.62432.5771 2.5313 2.4869 3.4651 3 .3872 3.3121 3.2397 3.1699 4.21244 .1002 3.99273.8897 3.7908 4.9173 4.7665 4.62294.4859 4.3553 5.5824 5.3893 5.2064 5.0330 4.8684 6.2098 5.9713 5.7466 5.5348 5.3349 6.8017 6.5152 6.2469 5.9952 5.7590 7.3601 702366.71016.4177 6.1446 7.8869 7.4987 7.1390 6.8052 6.4951 8.3838 7.9427 7.5361 7.1607 6.8137 8.8527 8.3577 7.9038 7.48697.1034 9.29508 .74558.2442 7.78627.3667 9.71229.107985595 8.0607 7.6061 10.1059 9.4466 88514 8.3126 7.8237 10.4773 9.7632 9.1216 8.5436 8.0216 10.8276 10.0591 9 .3719 8.7556 8.2014 11.1581 10.3356 9.6036 8.9501 83649 11.4699 10.5940 9.8181 9.1285 8.5136 12.7834 11.6536 10.6748 9.82 26 9.0770 13.7648 12.4090 11.2578 10.2737 9.4269 14.4982 1 2.9477 11.6546 10.5668 9.6442 15.0463 13.3317 11.9246 10.7574 9.7791 0.8929 0.8696 1.6901 1.6257 2.4018 2.2832 3.0373 2.8550 3.6048 3.3522 4.1114 3.7845 4.5638 4.1604 4.9676 4.4873 5.3282 4.7716 5.6502 5.0188 5.9377 5.2337 6.1944 5.4206 6.4235 5.5831 6.6282 5.7245 6.81095.8474 6.9740 5.9542 7.1196 6.0472 7.2497 6.1280 73658 6.1982 7.4694 6.2593 7.8431 6.4641 8.0552 6.5660 8.1755 6.6166 8.2438 6.6418 Used to calculate the present value of a series of equal payments made at the end of each period. For example: What is the present value of $2.000 per year for 10 years assuming an annual interest rates of 92 For 10,1-93)the PV factor is 6417752.000 per year for 10 years is the equivalent of $12.835 od 52.000 X 6.4177). f=[(1 + i)" - 1] TABLE B.48 Future Value of an Annuity of 1 Rate Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 15% 11 1.0000 1.0000 1.0000 1.000 1.0000 1.0000 1.0000 1 .0000 1.0000 1.0000 1.0000 1.0000 2.0100 2.0200 2.0300 2.0400 2.0500 2.0600 2.0700 20800 20900 2.1000 2.1200 2.1500 3.0301 3.0604 3.0909 3.1216 3.1525 3.1836 3.2149 3.2464 3.2781 3.3100 3.3744 3.4725 4.0604 4.1216 4.1836 4.2465 4.3101 43746 4.4399 4.5061 4.5731 4.6410 4.7793 4.9934 5.1010 5.2040 5.3091 5.4163 5.5256 5.6371 5.7507 5.8666 5.9847 6.1051 6.3528 6.7424 6.1520 6.3081 6.4684 0.6350 6.8019 6.9753 7.1533 7.3359 7.5233 7.7156 8.1152 8.7537 7.21357.4343 7.66257 .8983 8.1420 8.3938 8.6540 8.9228 9.2004 9.4872 10.0890 11.0668 8.2857 8.5830 8.8923 9 .2142 9.5491 9.8975 10.2598 10.6366 11.028511.4359 12.2997 13.7268 9.3685 9.7546 10.1591 10.5828 11.0266 11.4913 11.9780 124876 13.0210 13.5795 14.7757 16.7858 10.4622 10.9497 11.4639 12.0061 12.5779 13.1808 13.8164 144866 15.1929 15.9374 17.5487 20.3037 11.5668 12.1687 12.8078 13.4864 14.206814.9716 15.7836 16.6455 17.5603 18.5312 20.6546 24.3493 126825 13.4121 14.1920 15.0258 15.9171 16,8699 17.8885 1 8.9771 20.1407 21.3843 24.1331 29.0017 13.8093 14.6803 15.6178 16.6268 17.713018.8821 20.1406 21.4953 22.9534 24.5227 28.0291 34.3519 14.9474 15.9739 17.0863 18.2919 19.5986 21.0151 225505 24.2149 26.0192 27.9750 32.3926 40.5047 16.0969 17.2934 18.5989 20.0236 21.5786 23.2760 25.1290 27.1521 29.3609 31.7725 37.2797 47.5804 17.2579 18.6393 20.1569 21.8245 23.6575 25.6725 27.8881 30 3243 33.0034 35.9497 42.7533 55.7175 18.4304 20.0121 21.7616 23.6975 25.8404 28.2129 30.8402 33.7502 36,9737 40.5447 48.8837 65.0751 19.6147 21.4123 23.4144 25.6454 28.1324 30.9057 33.999037.450241.3013 45.5992 55.7497 75.8364 20.8109 22.8406 25.1169 27.6712 30.5390 33.7600 37.3790 4 1.4463 46.0185 51.1591 63.4397 88.2118 22.0190 24.2974 26.8704 29.7781 33.0660 36.7856 40.9955 45.7620 51.1601 57.2750 72.0524 102.4436 28.243232.0303 36.459341.6459 47.7271 54.8645 63.249073.1059 84.700998.3471 133.3339 212.7930 34.7849 40.5681 47.5754 56.084966.4388 79.0582944608 113.2832 136.3075 164.4940241.3327 434.7451 41.6603 49.994560.4621 73.652290.3203 111.4348 138.2369172.3168 215.7108 271.0244 431.6635 8 81.1702 48.8864 60.4020 75.40139 5.0255 120.7998 154.7620 199.6351 259,0565 337.8824 442.5926 767.0914 1.779.0903 18 19 40 Used to calculate the future value of a cries of equal payments made at the end of each period. For example: What is the future value of $4.000 per year for 6 years assuming an annual interest rate of Fe -61 , the FV factor is 73159.54.000 per year for 6 years accumulates to $ (540x73339 Initial Investment per Proj Stout Stout Initial Investment: $24,000 Expected Net Cash Flows per P Stout Saved vestment per Project Boise Boise Initial Investment: $30,000 Net Cash Flows per Project Boise