Gabriel Mfg. accepts proposals for capital investments from its division managers once a year. This year two proposals were received. The company seta dheunt rate for analyzing projects. The company is only going to finance one project this year. The two proposed projects are Project A: The manager has requested to replace an old piece of machinery with a new and more efficient piece of equipment. The old machinery would be would the following year after installation of the new equipment. The new equipment has an 8-year life. . Purchase new equipment $400,000 Sell old equipment in year 1 30,000 Reduction in anal maintenance costs 1.000 Major maintenance overhaul in year 4 50.000 Increase in anul cash inflows due to increased production 70,000 Project B: Install solar panels on current facility to reduce electric costs, Panels have a 8-year life. Cost of solar system $200,000 Tax credits received in year 1 90,000 . Annual reduction in electric bill 30,000 Annual maintenance costs 1.000 Required: 1. Calculate the net present value for each project. Show all computations by preparing a ne present value schedule. 2. Which project(s) meet the screening requirements of the company? 3. Which project should the company accept based on net present value alone? 4. Calculate the profitability index for each project? Which project should the company accept based on the profitability index! Se wwy National Association of Accants A professional management accounting asso Present Value of $1 1% Periods 0.5% 0.995 2 0.990 3 0.985 4 0.980 0.650 0 567 5 6 7 B 0.975 0.971 0.966 0.961 9 10 11 12 0.956 0.951 0.947 0.942 1.5% 2% 3% 0.990 0.98$0.980 0.971 0.962 0.980 0.971 0.961 0.943 0.925 0.971 0.956 0.942 0.915 0.889 0.961 0.942 0.92 0.888 0.895 0.951 0.928 0.906 0.863 0.822 0.942 0.915 0.888 0.837 0.933 0.901 0.790 0.871 0.813 0.760 0.923 0.888 0.853 0.789 0.731 0.914 0.875 0.837 0.766 0.703 0.905 0.862 0.820 0.744 0.676 0.896 0.849 0.804 0.722 0.650 0.887 0.836 0.788 0.701 0.625 0.899 0.824 0.773 0.681 0.601 0.870 0.812 0.758 0.661 0.577 0.861 0.800 0.743 0.642 0.555 0.853 0.788 0.728 0.623 0.534 0.836 0.765 0.700 0.587 0.494 0.820 0.742 0.673 0.554 0.456 0.803 0.721 0.647 0.522 0.422 0.788 0.700 0.622 0.492 0.390 0.772 0.679 0.598 0.464 0.36 0.757 0.659 0.574 0,437 0.333 0.742 0.640 0.552 0.412 0.308 0.727 0.621 0.531 0.388 0.285 13 14 15 16 0.937 0.933 0.928 0.923 SS 696 7% 8% 946 10% 0.952 0.943 1256 0.935 1895 0.226 16% 0.917 0.90 0.893 0.877 0.02 0.86 0.811 20 0.890 0.907 0.873 0.857 0.842 0.864 0.836 0.797 0.769 0.840 0,816 0.194 0.772 0.743 0118 0694 0.823 0.792 0.763 0.751 0.712 0.675 0.641 0.735 0.708 0.609 0.579 0.683 0.636 0.592 0,552 0.516 0.412 0.784 0.747 0.713 0.681 0.621 0.746 0.705 0.666 0.630 0.596 0.564 0.507 0456 0.410 0,370 0.519 0.476 0.432 0.402 0.211 0.665 0.623 0.5830.547 0.513 0.452 0.400 0.333 0.677 0.627 0.582 0.540 0.354 0.114 0.279 0.502 0.467 0.404 0.351 0.305 0.25% 0.233 0.645 0.392 0.544 0.500 0.480 0.424 0.361 308 0.263 0.225 0.194 0.614 0.558 0.508 0.463 0.422 0.396 0.322 0.270 0.227 0.191 0.162 0.585 0.527 0.475 0.420 0.388 0.350 0.287 0.237 0.195 0.162 0.135 0.557 0.497 0.444 0.397 0.356 0.319 0.251 0.208 0.16 0.137 0.112 0.530 0.469 0.415 0.368 0.326 0.290 0.229 0.182 0.145 0.116 0.093 0.505 0.442 0.388 0.340 0.299 0.263 0.205 0.160 0.125 0.009 0.074 0.481 0.417 0.362 0.315 0.275 0.239 0.183 0.140 0.10% 0.014 0.065 0.458 0.394 0.339 0.292 0.252 0.218 0.163 0.123 0.093 0.071 0.054 0.416 0.350 0.296 0.250 0.212 0.180 0.130 0.095 0.060 0.051 0.036 0.377 0.312 0.258 0.215 0.178 0.149 0,104 0.073 0.051 0.037 0.025 0.342 0.278 0.226 0.184 0.150 0.123 0.083 0.056 0.038 0.026 0.018 0.310 0.247 0.197 0.158 0.126 0.102 0.066 0.043 0.02% 0.019 0.013 0.220 0.281 0.172 0.106 0.135 0.084 0.053 0.009 0.033 0.021 0.014 0.196 0.150 0.116 0.090 0.069 0.042 0.016 0.010 0.005 0.231 0.14 0.131 0.099 0.075 0.057 0.033 0.020 3.012 0.007 0.004 0.210 0.155 0.063 0.085 0.LIS 0.003 0.005 0.027 0.047 0.015 0.009 039 0.021 0.012 0.006 0.002 18 20 2Z 24 0.914 0.905 0.896 0.887 0.255 0.026 26 28 30 32 0.878 0.870 0.86! 0.852 Present Value of an Ordinary Annuit 296 AN 20% 10% 0.909 1.236 2.487 3.170 0.13) 16 16% 0.893 0.71 0.862 1.690 1.647 1.605 2.402 2.122 2246 3.037 2.914 2.798 3.605 3.294 3.889 4.564 4.288 4.965 4.639 4.146 1894 0.847 1.566 2.174 2.400 1.528 2.106 2.589 3.433 3.127 4.11 3.791 4.155 4.868 5.335 2.991 1.685 4019 3.491 3.2.2 4.078 3.325 1.605 3.837 5.759 6.145 6.495 6.814 5.328 5.650 5.932 6.194 4.303 4.494 4,656 4.793 4.031 4.192 4.327 4.439 Payments 0.5% 1% 1.5% 396 496 0,995 0.990 596 0.985 896 795 0.980 994 0.971 1.970 1.985 0.962 0.952 1.956 0.943 0.935 0.926 1.942 1.913 1.236 0.017 1.859 1.333 2.970 2.941 2.912 2.884 3.950 1.808 1.733 2.829 2.775 1.759 3.002 3.854 2.723 2.673 3.ROS 3.630 3.717 2.624 2.577 2.531 3.546 3.465 3.387 3.312 3.240 5 4.926 4.853 4,783 4.713 4.580 4,452 4.329 6 5.896 5.795 5.601 4.212 4.100 5.697 3.993 5.417 5.242 5.076 3.890 7 4,917 6.362 4.623 6.728 6.598 6.472 4.767 6.230 4.486 6.002 7.823 5.786 S.582 7.652 5.206 5.389 7.486 7.325 7.020 6.733 5.033 6.463 6.210 5.971 5.747 5.535 9 8.779 8.566 8.361 8.162 7.786 7.435 7.108 6.802 6.515 6.247 10 9.730 9.471 9.222 8.983 5.995 8.530 8.11 7.722 7.360 7.024 10.677 10.368 10.071 6.710 6.418 11 9.787 9.253 8.760 8.306 7.887 7,499 7.139 6.805 12 11.619 11.255 10.908 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 13 12.556 12.134 11.732 11.348 10.635 9.986 9.394 8.853 3.358 7.904 7.487 14 13.489 13.004 12.543 12.106 11.296 10.563 9.899 9.295 3.745 8.244 7.786 15 14.417 13.865 13.343 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.061 16 15.340 14.718 14,131 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 18 17.173 16.398 15.673 14.992 13.754 12.659 11.690 10.328 10.059 9.372 8.756 20 18.987 18.046 17.169 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.129 22 20.784 19.650 18.621 17.658 15.937 14.451 13.163 12.042 11.061 10.201 9.442 74 22.563 21.243 20.030 78.914 16.936 15.247 13.799 12.550 11.469 10.529 9.707 26 9.929 24.324 22.795 21.399 20.12117.877 15.983 14.375 13.003 11.826 10.810 28 26.058 24.316 22.72721.28118.764 16.663 14.898 13.406 12.137 11.051 10.116 30 27.794 25.803 24.016 22.396 19.600 17.292 15.372 13.765 12.409 11.258 10.274 32 29.503 27.270 25.267 23.468 20.389 17.874 15.803 14.084 12.647 11,435 10.406 34 31.196 28.703 26.482 24.499 21.132 18.411 16.193 14.368 12.85 11.587 10.518 36 32.871 30.108 27.661 25.489 21.832 18.908 16.547 14.621 13.035 11.717 10.612 40 36.172 32.835 29.916 27.355 23.115 19.793 17.159 15.046 13.332 11.925 10.757 44 39.408 35.455 32.041 29.080 24.254 20.549 17.663 15.383 13.558 12.077 10.861 10.934 48 42.580 37.974 34.043 30.673 25.267 21.195 18.077 15.650 13.730 12.189 7.103 7.367 7.606 7.824 6.424 6.628 6.811 6.974 4.946 4.607 5.216 4.833 5.453 3.029 5.860 5.197 5.82 5.342 6,002 5.468 6.142 5.575 6.265 5.663 6.467 5.813 6.623 5.929 6.743 6.631 6.835 6.073 4.910 5.008 5.092 4162 4,533 4.611 4.675 8.20: 8.514 8.772 7.250 7.469 7.645 7.784 5.273 5.35) 5.410 5.451 4.812 4.870 4.900 4.937 8.985 9.161 9.307 9.427 9.526 7.896 7.984 3.055 2112 6.906 6.961 7.003 7.035 6.118 6.152 6.177 6.196 5.480 5.502 3.512 4.956 4.970 4.979 4.985 5.528 9.609 9.677 9.779 9.849 9.897 2.157 8.192 8.244 8.276 8.297 7.050 7.079 7.105 7.120 7.130 6.210 6.220 6.213 6.241 6.245 5.535 5.541 5.548 5.552 5.554 4.990 4.993 4.997 4.998