Question
Hunt Inc. intends to invest in one of two competing types of computer-aided manufacturing equipment: CAM X and CAM Y. Both CAM X and CAM
Hunt Inc. intends to invest in one of two competing types of computer-aided manufacturing equipment: CAM X and CAM Y. Both CAM X and CAM Y models have a project life of 10 years. The purchase price of the CAM X model is $3,600,000, and it has a net annual after-tax cash inflow of $900,000. The CAM Y model is more expensive, selling for $4,200,000, but it will produce a net annual after-tax cash inflow of $1,050,000. The cost of capital for the company is 10%.
Required:
1.Calculate the NPV for each project. Round present value calculations and your final answers to the nearest dollar.
CAM X:
CAM Y:
- Kylie Sorensen has just invested $1,400,000 in a new biomedical technology. She expects to receive the following cash flows over the next 5 years: $350,000, $490,000, $700,000, $420,000, and $280,000.
What is the payback period for Kylie? Round your answer to one decimal place.
_____years
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