Net Present Vave. Use Exhibit 12B.1 and Exhibit 128.2 to locate the present value of an annuity of $1, which is the amount to be multiplied times the future annual cash flow amount. Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. a. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be 5480,000 per year. The system costs $1,450,000 and will last 10 years. b. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $180,000. 5 he estimates that the retum from owning her own shop will be $50,000 per year. She estimates that the shop will have a uscful life of 6 years. c. Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10\%. The project was expected to produce annual after-tax cash flows of $135,000. Required: 1. Compute the NpV tor Campbell Manufacturing, assuming a discount rate of 12%. If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a negative NPV. x Should the company buy the new welding system? 2. Conceptual Connection: Assuming a required rate of retum of 8%, calculate the NPV for Evee Cardenas' investment. Round to the nearest dollan If required; round all present value calculations to the nearest dollar. Use the minus sign to indicate a negative NPV. x Should she invest? What if the estimated return was $135,000 per year? Calculate the new Npy for Evee Cardenas' investment. Would this affect the decision? What does this tell you about your analysis? Round to the nearest dollar. Net Present Vave. Use Exhibit 12B.1 and Exhibit 128.2 to locate the present value of an annuity of $1, which is the amount to be multiplied times the future annual cash flow amount. Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. a. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be 5480,000 per year. The system costs $1,450,000 and will last 10 years. b. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $180,000. 5 he estimates that the retum from owning her own shop will be $50,000 per year. She estimates that the shop will have a uscful life of 6 years. c. Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10\%. The project was expected to produce annual after-tax cash flows of $135,000. Required: 1. Compute the NpV tor Campbell Manufacturing, assuming a discount rate of 12%. If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a negative NPV. x Should the company buy the new welding system? 2. Conceptual Connection: Assuming a required rate of retum of 8%, calculate the NPV for Evee Cardenas' investment. Round to the nearest dollan If required; round all present value calculations to the nearest dollar. Use the minus sign to indicate a negative NPV. x Should she invest? What if the estimated return was $135,000 per year? Calculate the new Npy for Evee Cardenas' investment. Would this affect the decision? What does this tell you about your analysis? Round to the nearest dollar
