Hazen Manufacturing, Inc. has a manufacturing machine that needs attention. (Click the icon to view additional information.) Hazen expects the following net cash inflows from the two options: (Click the icon to view the net cash flows.) Data Table le. Refurbish Current Purchase New Year Hazen uses straight-line depreciation and requires n annual return of 10% e.) Machine Machine Read the r 1,650,000 $ 1 300,000 670,000 2 920,000 Requirement 1. Compute the payback, the ARR, the NPV, and the profitability index of these two options. 490,000 740,000 Compute the payback for both options. Begin by completing the payback schedule for Option 1 (refurbish). 4 310,000 560,000 Net Cash Outflows Net Cash Inflows 130,000 380,000 Accumulated 6 130,000 380.000 Year Amount Invested Annual 130,000 380.000 2,600,000 7 0 130,000 380,000 380,000 2 380,000 3 10 3.640,000 $ 4,800,000 A Total 5 6 Print Done 7 (Round your answer to one decimal place.) The payback for Option 1 (refurbish current machine) is years. Now complete the payback schedule for Option 2 (purchase) Net Cash Outflows Net Cash Inflows Amount Invested Yea Annual Accumulated i More Info S 3,200,000 1 2 The company is considering two options. Option 1 is to refurbish the current machine at a cost another eight years and then have no residual value. Option 2 is to replace the machine at a cost residual value. f$2,600,000. If refurbished, Hazen expects the machine to last f$3,200,000. A new machine would last 10 years and have no 4 5 6 Print Done 7 8 10 The payback for Option 2 (purchase machine) is years new Compute the ARR (accounting rate of return) for each of the options ARR % Refurbish % Purchase Compute the NPV for each of the options. Begin with Option 1 (refurbish). (Enter the factors to three decimal places. X.XXX. Use parentheses or a minus sign for Net Cash PV Factor Present Years Inflow (i= 10%) Value Present value of each year's inflow: (n 1) 1 2 (n 2) 3 (n 3) (n 4) 5 (n 5) rt LO (n 6) 6 (n 7) 7 (n 8) Total PV of cash inflows C Initial investment Net present value of the project Now compute the NPV for Option 2 (purchase). (Enter the factors to three decimal places. X.XXX. Use parentheses or a minus sign for a negative net present value.) Net Cash PV Factor Present Years Inflow (i = 10%) Value Present value of each year's inflow (n 1) 2 (n 2) 3 (= 3) 4 (n 4) In-E 5 (n 5) 6 (n 6) 7 (n 7) 8 (n 8) (n 9) (n 10) 10 Total PV of cash inflows 0 Initial investment Net present value of the project Finally, compute the profitability index for each option. (Round to two decimal places X.XX.) Profitability index Refurbish Purchase LO Requirement 2. Which option should Hazen choose? Why? Review your answers in Requirement 1 the other option, a NPV, and its profitability index is because this option has a Hazen should choose payback period, an ARR that is Present Value of $1 9% Periods 1% 2% 3% 4% 5% 6% 7% 8% 10% 12% 14% 15% 16% 18% 20% 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0.847 0.833 0.961 2 0.980 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.797 0.769 0.756 0.743 0.718 0.694 3 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.712 0.675 0.658 0.641 0.609 0.579 4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.636 0.592 0.572 0.552 0,516 0.482 5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.567 0.519 0.497 0.476 0.437 0.402 0.410 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.507 0.456 0.432 0.370 0.335 0.583 7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.547 0.513 0.452 0.400 0.376 0.354 0,314 0.279 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.404 0.351 0.327 0.305 0.266 0.233 0.284 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.361 0.308 0.263 0.225 0.194 0.820 0.162 10 0.905 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.322 0.270 0.247 0.227 0.191 11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.287 0.237 0.215 0.195 0.162 0.135 12 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.257 0.208 0.187 0.168 0.137 0.112 0.182 13 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.229 0.163 0.145 0.116 0.093 14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.205 0.160 0.141 0.125 0.099 0.078 15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.183 0.140 0.123 0.108 0.084 0.065 0.071 16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.163 0.123 0.107 0.093 0.054 0.371 0.350 0.108 17 0.844 0.714 0.605 0.513 0.436 0.317 0.270 0.231 0.198 0.146 0.093 0.080 0.060 0.045 0.296 0.212 18 0.836 0.700 0.587 0.494 0.416 0.250 0.180 0.130 0.095 0.081 0.069 0.051 0.038 0.031 0.026 19 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.116 0.083 0.070 0.060 0.043 0.456 0.258 0.051 20 0.820 0.673 0.554 0.377 0.312 0.215 0.178 0.149 0.104 0.073 0.061 0.037 21 0.811 0.660 0.538 0439 0.359 0.294 0.242 0.199 0.164 0.135 0.093 0.064 0.053 0.044 0.031 0.022 0.80 0.123 0.04 22 0.647 0.522 0.422 0.342 0.278 0.226 0.184 0.150 0.083 0.056 0.038 0.026 0.01 23 0.795 0.634 0.507 0.406 0.326 0.262 0.211 0.170 0.138 0.112 0.074 0.049 0.040 0.033 0.022 0.015 0.043 24 0.788 0.622 0.492 0.478 0.390 0.310 0.247 0.197 0.158 0.126 0.102 0.066 0.035 0.028 0.019 0.013 0.184 0.092 0.024 25 0.780 0.610 0.375 0.295 0.233 0.146 0.116 0.059 0.038 0.030 0.016 0.010 Present Value of Ordinary Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% 16% 18% 20% 1 ta 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0.847 0.833 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.690 1.647 1.626 1.605 1.566 1.528 3 2.941 2.884 2.829 2,775 2.723 2.673 2.624 2.577 2.531 2.487 2,402 2.322 2.283 2.246 2.174 2.106 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.037 2.914 2.855 2,798 2.690 2.589 5 4.853 4.713 4,580 4.452 4.329 4,212 4.100 3.993 3.890 3.791 3.605 3.433 3.352 3.274 3.127 2.991 6 5.795 5.601 5417 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.111 3.889 3.784 3.685 3.498 3.326 7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4,564 4,288 4.160 4.039 3.812 3.605 7.652 7,325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335 4.968 4,639 4.487 4.344 4.078 3.837 8.566 8.162 7,786 7.435 7,108 6.802 6.515 6.247 5.995 5.759 5.328 4.946 4.772 4.607 4,303 4.031 10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.650 5.216 5.019 4.833 4.494 4.192 11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 5.938 5.453 5.234 5.029 4.656 4.327 11.255 10.575 12.134 11.348 12 9.954 9.385 8.863 8.384 7.943 7.536 7,161 6.814 6.194 5.660 5.421 5.197 4.793 4.439 13 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.424 5.842 5.583 5.342 4.910 4.533 13.004 12.106 14 11.296 10.563 9.899 11.118 10.380 9.295 8.745 8.244 7.786 7,367 6.628 6.002 5.724 5.468 5.008 4.611 13.865 12.849 11.938 15 9.712 9.108 8.559 8.061 7.606 6.811 6.142 5.847 5.575 5.092 4.675 14.718 13.578 11.652 10.838 12.166 11.274 12.659 11.690 13.134 12.085 11.158 13.590 12.462 11.470 16 12.561 10.106 9.447 8.851 8.313 7.824 6.974 6.265 5.954 5.669 5.162 4.730 15.562 14.292 13.166 17 16.398 14.992 13.754 17.226 15.678 10.477 9.763 9.122 8.544 8.022 7,120 6.373 6.047 5.749 5.222 4,775 18 10.828 10.059 9.372 8.756 8.201 7,250 6.467 6.128 5.818 5.273 4.812 19 14.324 10.336 9.604 8.950 8.365 7,366 6.550 6.198 5.877 5.316 4.844 20 18.046 16.351 14.877 10.594 9.818 9.129 8.514 7,469 6.623 6.259 5.929 5.353 4.870 21 18.857 17.011 15.415 14.029 12.821 11.764 10.836 10.017 9.292 8.649 7.562 6.687 6.312 5.973 5.384 4.891 17.658 13.163 12.042 14.857 13.489 12.303 22 19.660 15.937 14.451 10.201 11.272 10.371 11.469 10.529 11.654 10.675 11.061 9.442 8.772 7.645 6.743 6.359 6.011 5410 4.909 23 20.456 18.292 16.444 21.243 18.914 16.936 15.247 13.799 12.550 24 22.023 19.523 17.413 9.580 8.883 7,718 6.792 6.399 6.044 5.432 4.925 9.707 8.985 7,784 6.835 6.434 6.073 5.451 4.937 15.622 14.094 12.783 abil 25 9.823 9.077 7.843 6.873 6.464 6.097 5.467 4.948 Future Value of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% 1 1.010 1.020 1.030 1.040 1.050 1.060 1.070 1.080 1.090 1.100 1.120 1.140 1.150 2 1.020 1.040 1.061 1.082 1.103 1.124 1.145 1.166 1.188 1.210 1.254 1.300 1.323 3 1.030 1.061 1.093 1.125 1.158 1.191 1.225 1.260 1.295 1.331 1.405 1.482 1.521 4 1.041 1.082 1.126 1.170 1.216 1.262 1.311 1.360 1.412 1.464 1.574 1.689 1.749 5 1,051 1.104 1.159 1.217 1.276 1.338 1.403 1,469 1.539 1.611 1,762 1.925 2.011 1,062 1.126 1.194 1.265 1.340 1.419 1.501 1.587 1.677 1.772 1.974 2.195 2.313 7 1.072 1.149 1.230 1.316 1.407 1.504 1.606 1.714 1.828 1.949 2.211 2.502 2.660 1.083 1.172 1.267 1.369 1.477 1.594 1.718 1.851 1.993 2,144 2.476 2.853 3.059 1.094 1.195 1.305 1.423 1.551 1.689 1.838 1.999 2.172 2.358 2.773 3.252 3.518 10 1.105 1.219 1.344 1.480 1.629 1.791 1.967 2.159 2.367 2.594 3.106 3.707 4.046 11 1.116 1.243 1.384 1.539 1,710 1.898 2.105 2.332 2,580 2.853 3.479 4.226 4.652 12 1.127 1.268 1.426 1.601 1.796 2.012 2.252 2.518 2.813 3.138 3.896 4,818 5.350 13 1.138 1.294 1.469 1.665 1.886 2.133 2.410 2.720 3.066 3.452 4.363 5.492 6.153 14 1.149 1.319 1.513 1.732 1.980 2.261 2.579 2.937 3.342 3.798 4.887 6.261 7.076 15 1.161 1.346 1.558 1.801 2.079 2.397 2.759 3.172 3.642 4.177 5.474 7,138 8.137 16 1.173 1.373 1.605 1.873 2.183 2.540 2.952 3.426 3.970 4,595 6.130 8.137 9.358 17 1.184 1.400 1.653 1.948 2.292 2.693 3.159 3.700 4.328 5.054 6.866 9.276 10.76 18 1.196 1.428 1.702 2.026 2.407 2.854 3.380 3.996 4.717 5.560 7.690 10.58 12.38 19 1.208 1.457 1.754 2.107 2.527 3.026 3.617 4.316 5.142 6.116 8.613 12.06 14.23 20 1.220 1,486 1.806 2.191 2.653 3.207 3.870 4,661 5.604 6.727 9.646 13.74 16.37 21 1.232 1.516 1.860 2.279 2.786 3.400 4.141 5.034 6.109 7.400 10.80 15.67 18.82 22 1.245 1.546 1.916 2.370 2.925 3.604 4.430 5.437 6.659 8.140 12.10 17.86 21.64 23 1.257 1.577 1.974 2.465 3.072 3.820 4.741 5.871 7.258 8.954 13.55 20.36 24.89 24 1.270 1,608 2.033 2.563 3.225 4.049 5.072 6.341 7.911 9.850 15.18 23.21 28.63 25 1.282 1.641 2.094 2.666 3.386 4.292 5.427 6.848 8.623 10.83 17.00 26.46 32.92 Future Value of Ordinary Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% nui 1.000 1.000 1.000 1.000 1,000 1.000 1.000 1.000 1.000 1.000 1,000 1.000 1.000 2 2.010 2.020 2.030 2.040 2.050 2.060 2.070 2.080 2.090 2.100 2,120 2.140 2.150 3.030 3.060 3.091 3.122 3.153 3.184 3.215 3.246 3.278 3.310 3.374 3.440 3.473 4 4.060 4.122 4.184 4.246 4.310 4.375 4.440 4.506 4.573 4.641 4,779 4.921 4.993 5 5.101 5.204 5.309 5.416 5.526 5.637 5.751 5.867 5.985 6.105 6.353 6.610 6.742 7.523 6 6.152 6.308 6.468 6.633 6.802 6.975 7.153 7,336 7.716 8.115 8.536 8.754 7 7.214 7,434 7,662 7,898 8.142 8.394 8.654 8.923 9.200 9.487 10.09 10.73 11.07 8.286 8.583 8.892 9.214 9.549 9.897 10.260 10.64 11.03 11.44 12.30 13.23 13.73 13.58 9.369 9.755 10.16 10.58 11.03 11.49 11.98 12.49 13.02 14.78 16.09 16.79 10 10.46 10.95 11.46 12.01 12.58 13.18 13.82 14.49 15.19 15.94 17.55 19.34 20.30 11 11.57 12.17 12.81 13.49 14.21 14.97 15.78 16.65 17.56 18.53 20,65 23.04 24.35 12 12.68 13.41 14.19 15.03 15.92 16.87 17.89 18,98 20.14 21.38 24.13 27.27 29.00 13 13.81 14.68 15.62 16.63 17.71 18.88 20.14 21.50 22.95 24.52 28.03 32.09 34.35 14 14.95 15.97 17.09 18.29 19.60 21.02 22.55 24.21 26.02 27.98 32.39 37.58 40.50 15 16.10 17.29 18.60 20.02 21,58 23.28 25.13 27.15 29.36 31.77 37.28 43.84 47,58 16 17.26 18.64 20.16 21.82 23.66 25.67 27.89 30.84 34.00 30.32 33.00 35.95 42.75 50.98 55.72 17 18.43 20.01 21.76 23.70 25.84 28.21 33.75 36.97 40.54 48.88 59.12 65.08 41.30 18 19.61 21.41 23.41 25.65 28.13 30.91 37.45 45.60 68.39 75.84 55.75 20.81 41.45 46.02 88.21 19 22.84 25.12 27.67 30.54 33.76 37.38 51.16 63.44 78.97 41.00 20 22.02 24.30 26.87 29.78 33.07 36.79 45.76 51.16 57.28 72.05 91.02 102.4 39.99 44.87 81.70 21 23.24 25.78 28.68 31.97 35.72 50.42 56.76 64.00 104.8 118.8 22 24.47 27.30 30.54 34.25 38.51 43.39 49.01 55.46 62.87 71.40 92,50 120.4 137.6 23 25.72 28.85 32.45 36.62 41.43 47.00 53.44 60.89 69.53 79,54 104.6 138.3 159.3 24 26.97 30.42 34.43 39,08 44.50 50.82 58.18 66.76 76.79 88,50 118.2 158.7 184.2 it 25 28.24 32.03 36.46 41.65 47.73 54.86 63.25 73.11 84.70 98.35 133.3 181.9 212.8 st LO