I need help on question 13 only on the Franklin Lumber (Capital Budgeting Procedures) Case 21.

13) (a) Courtney Jones immediately realized that her evaluation would have to be redone. Pete Parker, the firms owner and CEO, has revised the information Jones used to evaluate the plywood presses. He now thinks that it is more appropriate to assume:

1) The selling (market) price of plywood increases by 4-percent per year.

2) Cash costs also increase by 4-percent per year.

3) Material costs will run 72 percent of sales.

4) The appropriate discount rate is 17 percent.

5) Other estimates are at their original values.

Evaluate the equipment with these changes.

(b) Parker feels quite good about all his estimates in (a) except for the growth rates in selling (market) price and cash costs.

Evaluate the machines in the following scenarios, and keep all other estimates at the values used in (a).

Both grow at 3 percent per year.

Both grow at 4 percent per year (actually done in part (a) ).

Both grow at 5 percent per year.

( c ) Parker also thinks there is some possibility that cash costs will increase faster than unit selling price.

Evaluate the machines in the following scenarios, and keep all other estimates at the values used in part (a).

Selling price grows at 3 percent per year, cash costs at 4 percent.

Selling price grows at 4 percent per year, cash costs at 5 percent.

Selling price grows at 3 percent per year, cash costs at 5 percent.

(d) Based on your answers to (b) and (c), does it appear that Parker should be concerned about the growth rates he is using? Explain.