For both questions, use the tables atatched:

1.) XYZ Company is considering the purchase of a new piece of equipment and has gathered the following information about the purchase: Initial investment ........... ? Annual cost savings .......... $38,000 Salvage value in 8 years ..... 20% of initial investment Repair in 5 years ............ $16,000 Working capital needed now ... $31,000 Cost of capital .............. 14% Life of project .............. 8 years The working capital needed now will be released for investment elsewhere at the end of the eight years. The net present value of the new equipment is -$26,656.

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2.) M.T. Glass, Inc. is considering the acquisition of a new piece of heavy machinery to replace an old, outdated machine that is currently used in its business operations. The new machine will cost $180,000 and is expected to last 9 years. The new machine would require a repair of $25,000 in year seven and another repair costing $8,000 in year eight. In addition, purchasing this machine would require an immediate investment of $30,000 in working capital. The working capital would be released for investment elsewhere at the end of the 9 years. The new machine is expected to have a $10,000 salvage value at the end of nine years. The old, outdated machine costs $160,000 per year to maintain and run. The new machine is only expected to cost $90,000 per year to maintain and run. M.T. Glass has a cost of capital of 16% and an income tax rate of 40%. Calculate the net present value (NPV) of the new machine.

Present Value of a Lump-Sum Rate of interest per period in percent Periods 3% 5% 8% 9% 10% 12% 14% 15% 16% 20% 0.971 0.952 0.925 0.917 0.909 0.893 0.877 0.870 0.862 0.833 0.943 0.907 0.857 0.842 0.826 0.797 0.770 0.756 0.743 0.694 0.915 0.864 0.794 0.772 0.751 0.712 0.675 0.658 0.640 0.579 0.889 0.823 0.735 0.708 0.683 0.635 0.592 0.572 0.552 0.482 5 0.863 0.784 0.680 0.650 0.620 0.567 0.520 0.497 0.476 0.402 0.838 0.746 0.630 0.596 0.565 0.507 0.456 0.432 0.410 0.335 0.813 0.710 0.584 0.547 0.513 0.452 0.400 0.376 0.354 0.279 8 0.789 0.677 0.540 0.502 0.467 0.404 0.350 0.327 0.305 0.233 0.766 0.645 0.500 0.460 0.424 0.360 0.308 0.284 0.263 0.194 10 0.744 0.614 0.463 0.422 0.385 0.322 0.270 0.247 0.227 0.162 12 0.701 0.557 0.397 0.356 0.319 0.257 0.208 0.187 0.169 0.112 15 0.642 0.481 0.315 0.275 0.240 0.183 0.140 0.123 0.108 0.065 16 0.623 0.458 0.292 0.252 0.218 0.163 0.123 0.107 0.093 0.054 17 0.605 0.436 0.270 0.231 0.198 0.146 0.108 0.093 0.080 0.045 18 0.587 0.416 0.250 0.212 0.180 0.130 0.095 0.080 0.069 0.038 10 0.570 0.396 0.232 0.195 0.164 0.116 0.083 0.070 0.060 0.031 20 0.554 0.377 0.215 0.178 0.149 0.104 0.073 0.061 0.051 0.026 21 0.538 0.359 0.199 0.164 0.135 0.093 0.064 0.053 0.044 0.022 24 0.492 0.310 0.158 0.126 0.102 0.066 0.043 0.035 0.028 0.013 25 0.478 0.295 0.146 0.116 0.092 0.059 0.038 0.030 0.025 0.011Present Value of an Annuity Rate of interest per period in percent Periods 3% 5% 8% 9% 10% 12% 14% 15% 16% 20% 0.971 0.952 0.925 0.917 0.909 0.893 0.877 0.870 0.862 0.833 1.914 1.860 1.783 1.759 1.736 1.690 1.647 1.625 1.605 1.528 2.829 2.723 2.577 2.531 2.487 2.402 2.322 2.283 2.245 2.107 3.717 3.546 3.312 3.240 3.170 3.037 2.914 2.855 2.798 2.589 4.580 4.330 3.993 3.890 3.790 3.605 3.433 3.352 3.274 2.991 O DO0 VALIA WN 5.417 5.075 4.623 4.486 4.355 4.111 3.889 3.785 3.685 3.325 6.230 5.786 5.206 5.033 4.868 4.564 4.288 4.160 4.039 3.605 7.020 6.463 5.747 5.535 5.335 4.968 4.639 4.487 4.344 3.837 7.786 7.108 6.247 5.995 5.759 5.328 4.946 4.772 4.607 4.031 8.530 7.722 6.710 6.418 6.145 5.650 5.216 5.019 4.833 4.193 12 9.954 8.863 7.536 7.160 6.814 6.194 5.660 5.420 5.197 4.439 15 11.938 10.380 8.560 8.060 7.606 6.810 6.142 5.847 5.575 4.675 16 12.561 10.838 8.851 8.313 7.824 6.974 6.265 5.954 5.669 4.730 17 13.166 11.274 9.122 8.544 8.022 7.120 6.373 6.047 5.749 4.775 18 13.754 1 1.690 9.372 8.755 8.201 7.250 6.467 6.128 5.818 4.812 19 14.324 12.085 9.604 8.950 8.365 7.365 6.550 6.198 5.878 4.844 20 14.877 12.462 9.818 9.129 8.514 7.470 6.623 6.259 5.929 4.870 21 15.415 12.821 10.017 9.292 8.649 7.562 6.687 6.313 5.973 4.891 25 17.413 14.094 10.675 9.823 9.077 7.843 6.873 6.464 6.097 4.948