Question
NPVMutually exclusive projects Hook Industries is considering the replacement of one of its old... AdminBootstrap2014-05-11 04:53:00 NPVMutually exclusive projects Hook Industries is considering the replacement
AdminBootstrap2014-05-11 04:53:00
NPVMutually exclusive projects Hook Industries is considering the replacement of one of its old drill presses. Three alternative replacement presses are under consideration. The relevant cash flows associated with each are shown in the following table. The firms cost of capital is 15%.
| Press A | Press B | Press C | |
| Initial investment (CF0) | $85,000 | $60,000 | $130,000 |
| Year (t) | Cash inflows (CFt) | ||
| 1 | $18,000 | $12,000 | $50,000 |
| 2 | 18,000 | 14,000 | 30,000 |
| 3 | 18,000 | 16,000 | 20,000 |
| 4 | 18,000 | 18,000 | 20,000 |
| 5 | 18,000 | 20,000 | 20,000 |
| 6 | 18,000 | 25,000 | 30,000 |
| 7 | 18,000 | 40,000 | |
| 8 | 18,000 | 50,000 |
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.profitability index for each press
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Financial Management Core Concepts
Authors: Raymond Brooks
4th Edition
134730417, 134730410, 978-0134730417
