Gallatin, Inc., Is deciding between investing in one of two machines in order to take on a new project. Each of the machines has an 8 year life. At the end of the 8 years, the machine will be sold at salvage value. Working capital is invested in the project immediately and reverts back to the company for use elsewhere at the end of the project's life. Additionally, the machine used for project A will require a cash expenditure for a major overhaul at the end of 3 years. A summary of the information related to each of the investments is presented below. Project A Project B Annual cash sales (for each of the 8 years) $250,000 $400,000 Annual cash expenses (for each of the 8 years) $130,000 $250,000 Annual depreciation on new equipment (for each of the 8 years) $ 70,000 $ 93,750 Initial cost of new equipment $600,000 $800,000 Salvage value of new equipment in 8 years S40,000 S 60,000 Working capital requirement $ 80,000 $120,000 Cost to overhaul new machine s 25.000 . 1. Assuming Gallatin's discount rate is 8%, compute the net present value (NPV) of each of the projects & state which project is preferable from an NPV perspective. To receive credit, present your work in a manner that demonstrates your understanding of the inflows and outflows (L.e. do not just provide an answer) (6 points) I recommend using the Excel spreadsheet template attached to this assignment. If you Be sure to label any rows added. Indicate (perhaps highlight) which number is the final answer for each project, State (type in) which project is preferable. do so: 2. Compute the internal rate of return (IRR) on each of the projects & state which project is preferable from an IRR perspective. Round your interest rate to two decimal places after the whole number (Le 2.33%). (4 points) I recommend using the Excel spreadsheet template attached to this assignment. If you do so: Be sure to label any rows added Indicate (perhaps highlight) which number is the final answer for each project. . * c D G PROCTA NET PRESENT VALL 1. QUESTION 2 1 Die 4 5 6.htm 7 A Cose Saving Now Yew1 Yew 2 Yew Yew Yews Vent Yew Your Yew The Net Present of Future Cars 1000 1.000 0.00 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1000 Nu Cash Outel 10 Dount 1 Pet welchflow 12 PROCTO NET PRESENT VALUE 14 15 16 Now Yeni Yeu Yew Ya T10 The Present Anna Costa 9 ve Value Net Cash flow Ouro 1 De Pren Vluche 1.000 1000 1.000 1.000 1300 1.000 1.800 1.000 1.000 1000 1.000 ES QUESTION 7 PRONECTA Now Tews Yewa Veu Teed Yews Yeard Yew You Yes Tela Initial 2 Ano Saving Torte Future Care 1.000 1 000 wow Outflow 5 Discount Rate 4 we of Cache 7 1.000 1000 1.00 1.000 1.000 1.000 1.000 1000 0.00 PRONT IN Done New Yew Yeni Year Yew Ves ve Yews Yew Tu Ne Preno we Chow WI A loving WWW Cafe T Pelucas 1.900 1.000 1000 1.000 1.000 0.00 1000 1000 16 10 Sheet