NPVlong dashMutually

exclusive projectsHook Industries is considering the replacement of one of its old metal stamping machines. Three alternative replacement machines are under consideration. The relevant cash flows associated with each are shown in the following table:

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. The firm's cost of capital is

9%.

a.Calculate the net present value

(NPV)

of each press.

b.Using NPV, evaluate the acceptability of each press.

c.Rank the presses from best to worst using NPV.

d.Calculate the profitability index (PI) for each press.

e.Rank the presses from best to worst using PI.

Machine A

Machine B

Machine C

Initial investment

(CF 0CF0)

$84 comma 50084,500

$60 comma 20060,200

$129 comma 900129,900

Year (t)

Cash inflows

(CF Subscript tCFt)

1

$18 comma 00018,000

$12 comma 10012,100

$49 comma 50049,500

2

$18 comma 00018,000

$14 comma 40014,400

$29 comma 90029,900

3

$18 comma 00018,000

$16 comma 30016,300

$20 comma 30020,300

4

$18 comma 00018,000

$17 comma 90017,900

$20 comma 10020,100

5

$18 comma 00018,000

$20 comma 40020,400

$19 comma 60019,600

6

$18 comma 00018,000

$25 comma 30025,300

$29 comma 50029,500

7

$18 comma 00018,000

long dash

$40 comma 00040,000

8

$18 comma 00018,000

long dash

$50 comma 200

Machine A $84,500 Init" Question Viewer PF) Year (t) VOU AWN- $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 Machine B Machine C $60,200 $129,900 Cash inflows (CF) $12,100 $49,500 $14,400 $29,900 $16,300 $20,300 $17,900 $20,100 $20,400 $19,600 $25,300 $29,500 $40,000 $50,200