Jonathan Butler, process engineer, knows that the acceptance of a new process design will depend on its economic feasibility. The new process is designed to improve environmental performance. On the negative side, the process design requires new equipment and an infusion of working capital. The equipment will cost $1,200,000, and its cash operating expenses will total $270,000 per year. The equipment will last for 7 years but will need a major overhaul costing $120,000 at the end of the fifth year. At the end of 7 years, the equipment will be sold for $96.000. An increase in working capital totaling $120.000 will be needed at the beginning. This will be recovered at the end of the years On the postive side, Jonathan estimates that the new process will save $400,000 per year in environmental costs fines and cleanup oss avoided) The cost of capital is 125 Required: 1. Prepare a schedule of cash flows for the proposed project (Assume that there are no income 2. Compute the NPV of the project. Should the new process design be accepted? s ) Refer to the list below for the exact wording of an amount description within your schedule. Amount Descriptions Equipment Equipment operating costs Cost savings Overhaul Recovery of working capital Salvage value Total Working capital Calculator Print item nii 1 2 3 4 5 6 7 8 9 10 1% 0.99010 0.98030 0.97059 0.96098 0.95147 0.04205 0.93272 0.92348 0.91434 0.90529 11 0.89632 12 0.88745 13 0.87866 14 0.86996 15 0.86135 16 0.85282 17 084438 18 0.83602 100.82774 200.81954 21 081143 22080340 23 079544 24 078757 Present Value of a Single Amount 2% 3% 4% 5% 6% 7% 8% 10% 12% 14% 16% 0.98039 18% 0.97087 20% 3 0.96154 0.95238 0.94340 0.93458 0.92593 0.91743 0.90009 0.89286 0.87719 0.86207 0.84746083333 0 0.96117 0.94260 0.92456 0.90703 089000 0.87344 085734 084168 0.82645 0.79719 0769470.74316 0.71818 0691440 0.94232 0.01514 0.88900 0.36354 0.83962 081630 0.79383 077218 0.75131071178 067497 0.64066 0.608630576700 0.92385 0.88849 0.85480 0.82270 0.79209 0.76290 0.73503 070843 068301 063562 0.50208 0.55229 0.51579 0.48225 02 090573 0,86261 0.82193 0.78353 0.74726 0.71290 0.68058064993 062092 0.56743 0.51937 0.47611 0.43711040188 0 0.88797 0.83748 0.79031 0.74622 0.70496066634 0.63017050027056417 0.50663 0.45559 0.4104 0.37043 034900 0.87056 0.81309 0.75992 0.71068 0.66506 0.62275 0.58349054703051316 045235 0.39964 0.35383 0.313030279080 0.85349 0.78941 0.73069 0.67684 0.62741 0.58201 0.54027 050187 0.46651 0.40388 0.35056 030503 0.26604 0.23257 0.1 083676 0.76642 0.70250 064461 0.59190 0.54393 0.50025 0.46043 0.42410 0.36061 0.30751 0.26295 0.22546 0.19381 0 0.82035 0.74409 0.67556 0.61391 0.55839 0.50635 0.46319 0.42241 0.38554 0.32197 0.26974 022668 019106 0.16151 01 0.80426 0.72242 0.64958 0.58468 052679 0.47509 042888 0.38753 0.35049 0.28748 0236620 19542 0.16192 0.1345900 0.78849 0.70138 0.62460 0.55684 0.49697 0.44401 0.30711 0.35553 0.31863 0.25668 0.20756 0.16846 0.13722 0.11216 00 0.77303 0.68095 0.60057 0.53032 0.46884 0.41496 0.36770 0.32618 0.28966 0.22917 0.18207 0.145230.11629009346 00 0.75788 0.66112 0.57748 0.50507 0.44230 0.38782 0.34046 029925 0.26333 0.20462 0.15971 0.12520 0.09855 0.0778900 0.74301 0.64186 0.56526 0.48102 0.41727 0.36245 0.31524 027454 0.23939 0.18270 0.14010 010793 0.00352 005491 0.0 0.72845 0.62317 0.53391 0.45811 0.39365 0.33873 0.29189 025187 021763 0.16312 0.12289 0.09304 0.0707800540900 0.71416 060502 0.51337 0.43630 0.37136 0.31657 027027 023107 0.19754 0.14564 0.107800000210.050080045070 070016 0.58739 0.49363 0.41552 0.35034 0.29586 0.25025 0.21199 0.17006 0.13004009456 0037560 0.060140.05083 068643 0.57029 0.47464 0.39573 033051 0.27651 0.001300 0.23171 0.19449 0.16351 0.11611 008205005139004308 067297 0.55368 005139 0.45630 0.31180025842 0.03661 0.000000 021456 0.37680 0.17843 0.140040.10367 0.07276 0.06383 0.24151 0.19866 0,04430 065978 0.16370013513 009056 0.03094 0.53755 0.001140 043883035894020416 0.00064 0055990036190020220018110 0.64684 0.52189042196 034185 027751 022571 018394015018012285 0.07379 0.1377801116 004911 003292 0.02222 0.0150000 0.17032 0.26160021005 063416 0.50560 0.32557 0.40573 010153 0.06588 0.19715 0.15770 012040 0.04308 0.02838 0.01208 001803 062172 0.49193 031007024608 0.39012 0.09230 0.058820037790 .02447 001596 0.010480 07761 037512979539 0233000.18425 0.146020.11597 W I U LIRAsignment Main.doFinvokerStake AssignmentSessionLocatorinprogress=false eBook Calculator Print Item P.-11. 5.97130 6.51523 Present Value of an Annuity nii 1% 2% 3% 8% 9% 1 10% 0990100 98039 12% 14% 0.97087 16% 0.96154 18% 095238 20% 0.94340 093458 092593 0917430909090.89286 087719 0207 034140085 2 1 97040 194156 1.91347 1 88609 185041 1.83339 1.80802 1.78326 1.75911 1.73554 169005164666 2.940992.88388 1.60523 156554 1527 282861 277509 2.72325 267301 262432 2.57710 2.53129 2.48635240183 232163 2245892 17427 2 10 4 3.90197 3.807733 .71710 3.62990 3.54595 3.46511 3.38721 3.31213 3.239723.16967 3.03735291371 2.79818 269006 2.586 5 4.853434.71346 4.57971 4.45182 4.32948 421236 4 10020 3.99271 3.889653.79079 3.60178 3433083274293.12717 2.990 6 5.79548 560143541710 5.24214 5.07500491732 4 76654 4 62288 448592435526 4.11141 388867 36674 349760332 7 6.72819 6.47199 623028 6.00205 5.78637 558238 5.38929 5.20637 5.03295 4368424.56376 428830 403257 3.81153 360 8 7 65168 732548 701909 6.73274 6.46321 6 20979 5.74664 5.53482 5.33493 4.96764 463886 434359407757389 9 8.56602 8.162247.78611 7435337.10782 6.80169 624689 5.99525 5.75902 5.32825 494637 4.60654 4.30302 4030 10 947130 B 9259 8530208 11090 7.72173 735009 702358 6.71000 6.41766 6.14457 5.65022 521612 483323 449409 419 11 10.36763 9.70665 9.25262 8.76048 8.30041 7.00087 7.49867 7.13896 6.80519 6 49506 503770 5.45273 502064 465601 4327 12 11 25508 10.575349.95400 938507 8.86325 832384 7 M269 7.53608 7.160736.81300 6.19437 5.66029 5.10711 4793224431 13 12 13374 11.34837 10 63496 998565 0.30357 8.852688.35765 7.90378 748690710336 6.42355 5.54236 534233 490961 4533 14 13.00370 12.10625 1129607 10 56312 9.896649 29498 8.74547 2424 7.78615 7.36609 662817 600207 5467535000064610 13.86505 15 12.04926 11.93794 11.11830 10.37966 9.10791 9.71225 8.55948 8.06040 7.606086.81006 6.14217 557546 5001564673 16 14.71787 13.57771 12.56110 11 65230 9.44665 10.83777 10.10590 8.85137 8.31256 782371 69730062650666850516235472 15.58225 17 14.29187 13.1661212.16667 11 274071047726 9.76322 9.12164 854363 02155 711003 6.37266574870522233 471 18 14.99203 1639827 13.75351 12.65930 8.75663 11 680501082760 10.059099.37189 8 20141 7249676467425.8178562731841 10 14.32380 13.13394 17.22601 1567846 12.08532 11.15812 .60360 9 5011 1033560 8.364027.36578655037587746531024 16.35143 14.87747 13 50033 2018.04555 12 46221 11.46902 74804466231352864636275 10 59401 981815 0126555 1356 18.85608 17 01121 21 15.41502 14.02016 864660756200 668896597314333 12.82115 11.76408 10 83553 10.01680921224 19.66038 17 65805 7.64465674294 601133540000 44243877154 13.16300 12.04158 22 15.93602 14.45112 1106124 10.20074 .58021 8863227.718436792060 2554321242 18.29220 12.30338 20.45582 16.44361 13.48857 23 1485684 112721910 87106 8064747784326835140726354500 1255036 13.70864 114693 10528769.70661 15 24696 1693554 24 21.2433918.91393 Previous Next 1. Prepare a schedule of cash flows for the proposed project (Assume that there are no income taxes) Refer to the list of Amount Descriptions for the exact wording of text items within your schedule an amount is negative or an outflow, first enter a minus sign (1) Schedule of Cash Flows Year 0 Equipment Working capital Years 1.7 Equipment operating costs 2(a) Compute the NPV of the project. For discount factors, use the tables shown in Present Value Table Round the present value calculation and your final answer to the nearest whole dolar an amount is negative, first enter a minus sign (-) The NPV of the project is 2) Should the new process design be accepted? the new process design be accepted