Period 1 4667 Future value interest factor of an ordinary annuity of $1 per period at i% for n periods, FVIFA(i,n). 4% 5% 6% 8% 9% 10% 11% 12% 13% 14% 15% 18% 1.000 2.050 3.153 1.000 2.060 3.184 1.000 2.090 3.278 1.000 2.100 3.310 1.000 2.110 1.000 2.120 3.374 4.779 1.000 2.130 3.407 3.342 4.184 4.246 4.310 4.375 4.440 4.506 4.641 4.710 4.850 5.309 5.416 5.526 6.468 6.802 6.633 7.662 7.898 8.142 1.000 2.140 3.440 4.921 4.573 6.610 6.480 6.353 6.228 5.985 5.637 6.105 5.751 5.867 8.536 8.323 7.716 7.913 8.115 7.336 7.523 6.975 7.153 10.730 10.405 9.487 8.394 10.089 8.654 9.783 9.200 8.923 13.233 12.300 12.757 10.637 11.436 11.028 11.859 9.897 10.260 8.583 9.549 8.892 9.214 16.085 15.416 14.776 14.164 13.579 13.021 11.978 12.488 11.491 9.755 11.027 10.583 10.159 18.420 17.549 19.337 15.937 16.722 15.193 13.816 14.487 13.181 12.006 12.578 10.950 11.464 20.655 21.814 23.045 19.561 18.531 17.560 16.645 15.784 14.972 14.207 12.808 13.486 12.169 25.650 24 133 27.271 22.713 21.384 18.977 20.141 15.917 16.870 17.888 15.026 14.192 13.412 32.089 29.985 20.212 28.029 24.523 22.953 21.495 20.141 18.882 17.713 16.627 14.680 15.618 34.883 37.581 32.398 30.095 27.975 22.550 24.215 26.019 21.015 19.599 18.292 17.086 15.974 37.280 40.417 43.842 34.405 31.772 29.361 27.152 25.129 23.276 21.579 20.024 17.293 18.599 50.980 46.672 42.753 35.950 39.190 30.324 33.003 27.888 25.673 23.657 21.825 20.157 18.639 59.118 58.739 48.884 44.501 40.545 30.840 28.213 25.840 23.698 21.762 20.012 55.750 61.725 45.599 50.396 41.301 37.450 33.999 30.906 88.212 21.412 78.969 70.749 63.440 50.939 51.159 46.018 41.446 33.760 37.379 102.44 91.025 80.947 72.052 22.841 64.203 57.275 45.762 51.160 40.995 36.786 181.87 212.79 155.62 133.33 24.297 84.701 98.347 73.106 54.865 63.249 356.79 434.75 293.20 241.33 199.02 164.49 136.31 113.28 94.461 881.17 693.57 548.68 431.66 341.59 271.02 215.71 172.32 138.24 1.779.1 1,342.0 1.013.7 767.09 581.83 442.59 337.88 7.217.7 4.994.5 2,400.0 3.459.5 1.668.8 815.08 68.394 23.414 25.645 28.132 25.117 30.539 26.870 33.066 47.727 66.439 36.459 32.030 40.568 47.575 60.462 49.994 75.401 60.402 90.320 79.058 111.43 154.76 120.80 259.06 199.64 1.163.9 573.77 406.53 84.579 290.34 209.35 112.80 O 8 8.286 9 9.369 10 10.462 1.000 2.010 2.020 3.030 3.060 4.060 4.122 5.101 5.204 6.152 6.308 2% 11 11.567 12 12.683 13 13.809 14 14.947 15 16.097 16 17.258 17 18.430 18 19.615 19 20.811 20 22.019 25 28.243 30 34.785 35 41.660 40 48.886 50 64.463 3% 1.000 1.000 2.040 2.030 3.091 27.671 29.778 41.646 56.085 73.652 95.026 152.67 7% 1.000 1.000 2.070 2.080 3.215 3.246 33.750,36.974 16% 19% 20% 1.000 1.000 1.000 1.000 1.000 2.150 3.473 4.993 6.742 1.000 2.170 2.160 2.180 2.190 2.200 3.572 3.606 3.506 3.640 3.539 5.215 5.066 5.141 5.291 5.368 7.154 6.877 7.014 7.297 7.442 9.207 8.754 8.977 9.442 9.683 9.930 11.414 11.067 11.772 12.142 12.523 12.916 14.773 15.327 13.727 14.240 15.902 16.499 17.519 19.923 18.285 19.086 20.799 16.786 25.959 23.521 24.709 22.393 20.304 21.321 32.150 30.404 27.200 28.755 25.733 24.349 39.581 37.180 34.931 29.002 30.850 32.824 45.244 48.497 42.219 39.404 36.786 34.352 54.841 50.818 47.103 43.672 40.505 66.261 56.110 60.965 51.660 47.580 87.442 79.850 72.939 66.649 55.717 60.925 105.93 87.068 96.022 78.979 71,673 65.075 128.12 103.74 115.27 93.406 84.141 75.836 154.74 138.17 123.41 110.28 98.603 186.69 165.42 146.63 130.03 115.38 402.04 471.98 342.60 249.21 292.10 1,181.9 966.71 790.95 647.44 530.31 2,314.2 2,948.3 1.816.7 1.426.5 1,120.7 5,529.8 7.343.9 4.163.2 2.360.8 3,134.5 45.497 31,515 21,813 10,436 15,090 59.196 72.035 Future value interest factor of $1 per period at i% for n periods, FVIF(i,n). Period 3% 7% 8% 9% 12% 6% 1.060 1.070 1.080 1.090 1.124 1.145 1.166 1.188 1.191 1.225 1.260 1.295 1.262 1.311 1.360 1.412 1.403 1.469 1.539 1.501 1.677 1.230 1.316 1.407 1.504 1.606 1.714 1.828 1.267 1.369 1.477 1.594 1.718 1.851 1.993 1.305 1.423 1.551 1.689 1.838 1.999 2.172 1.480 1.629 1.791 1.967 2.159 2.367 1.539 1.710 1.898 2.105 2.332 2.580 1.796 2.252 2.012 2.518 1.601 2.813 1.886 2.133 2.720 2.410 2.261 2.579 2.937 1.384 1.426 1.469 1.665 3.066 2.397 2.759 3.172 1.513 1.980 1.732 1.346 1.558 1.801 1.373 1.605 1.873 1.653 2.079 2.540 2.183 1.948 2.292 2.693 3.159 2.952 3.426 3.970 3.700 4.328 2.407 3.996 4.717 2.026 2.107 2.527 3.026 2.854 3.380 3.617 3.870 4.292 5.427 2.653 3.207 3.386 4.322 1 1.010 1.020 1.030 1.040 1.050 2 1.020 1.040 1.061 1.082 1.103 3 1.030 1.061 1.093 1.125 1.158 4 1.041 1.082 1.126 1.170 1.216 5 1.051 1.104 1.159 1.217 1.276 1.338 1.340 6 1.062 1.126 1.194 1.265 1.072 7 8 1.083 1.172 1.195 10 1.105 1.219 11 1.116 12 1.127 1.268 13 1.138 1.294 14 1.149 1.319 15 1.161 16 1.173 2.666 1.428 1.457 1.754 1.486 1.806 2.094 1.811 2.427 3.243 3.946 2.814 4.801 7.040 3.262 7.107 4.384 11.467 2.000 2.208 2.692 18 1.196 19 1.208 20 1.220 25 1.282 1.641 30 1.348 35 1.417 40 1.489 50 1.645 3.342 3.642 7.686 10.677 14.785 21.725 14.974 10.286 29.457 46.902 18.420 10% 1.100 1.210 1.331 1.464 1.611 1.772 1.949 2.144 2.358 2.594 2.853 3.138 3.452 3.797 4.177 4.595 5.054 5.560 6.116 5.142 4.661 5.604 8.623 6.727 10.835 17.449 7.612 10.063 13.268 20.414 28.102 45.259 31.409 117.391 74.358 11% 4.310 4.785 5.311 5.895 6.544 7.263 8.062 9.646 13.585 17.000 22.892 29.960 38.575 52.800 93.051 65.001 184 565 289.002 13% 1.130 14% 1.140 1.110 1.120 1.232 1.300 1.368 1.254 1.405 1.574 1.443 1.518 1.630 1.482 1.689 1.925 1.685 1.762 1.842 1.870 2.082 2.195 2.502 1.974 2.076 2.211 2.353 2.305 2.476 2.658 2.853 2.558 2.773 3.004 3.252 2.839 3.106 3.395 3.707 3.152 3.479 3.836 4.226 3.896 3.498 4.335 4.818 3.883 4.363 4.898 5.492 4.887 6.261 5.474 6.130 6.866 7.690 8.613 5.535 6.254 7.067 7.986 9.024 8.137 9.276 10.575 12.056 11.523 13.743 26.462 50.950 21.231 39.116 72.069 98 100 188.884 132.782 450.736 700.233 15% 1.150 1.323 1.521 1.749 2.011 2.313 2,660 3.059 3.518 4.046 4.652 5.350 6.153 7.076 8.137 9.358 16% 1.160 1.346 1.561 1.811 2.100 2.436 2.826 3.278 3.803 5.936 6.886 7.988 9.266 10.748 12.468 14.463 17% 1.170 1.369 1.602 1.874 2.192 2.565 3.001 3.511 4.108 4.807 5.624 6.580 7.699 9.007 10.539 12.330 18% 1.180 1.392 1.643 1.939 2.288 2.700 3.185 3.759 4.435 5.234 6.176 7.288 8.599 10.147 11.974 14.129 16.672 19.673 23.214 27.393 62.669 143.371 327.997 750:378 3.927.357 10.761 12.375 14.232 16.879 19.748 23.106 50.658 16.367 19.461 32.919 40.874 85.850 111.065 66.212 243.503 180.314 133.176 533.869 378.721 267.864 2,566.215 1.670.704 1,083.657 19% 1.190 1.416 1.685 2.005 2.386 2.840 3.379 4.021 4.785 5.695 6.777 8.064 9.596 11.420 13.590 16.172 19.244 22.901 27.252 32.429 77.388 184.675 440.701 1,051.668 5,988.914 20% 1.200 1.440 1.728 2.074 2.488 2.986 3.583 4.300 5.160 6.192 7.430 8.916 10.699 12.839 15.407 18.488 22.186 26.623 31.948 38.338 95.396 237.376 590.668 1,469.772 9.100.438 Mr. Kevin Dates is the owner of an expanding business operating in bakery industry located in Bridgetown, Barbados. Over the last few years business has been great. However, he believes it is time to grow and be more profitable. As such Mr. Dates has decided to invest in a new sophisticated convection oven that would boost production levels by 400% in a more efficient manner. As an astute assistant manager to Mr. Dates have asked you to analyze the following variables to assist in informing the correct decision: 1. Mr. Dates is considering investing in one of two convection ovens - Type ABC and Type XYZ; 2. The initial investment costs of ovens Type ABC and Type XYZ are both $115,000 each; 3. Over a 5 year period directly following the investment, projected revenue attributed to the Type ABC oven is $72,000 a year. While projected expenditure is $42,000 a year for the Type ABC oven: 4. This is not the same for the Type XYZ oven investment, which is projected to only have revenue and expenditure of $300,000 and $130,000 respectively in the fifth year; 5. The situation that surrounds the current oven (old) is that if it sold/traded-in under the Type ABC oven investment arrangement then Mr. Dates will receive a $14,000 profit a year on such a sale over a 5 year period: 6. Conversely with the Type XYZ oven investment the current oven if sold/traded-in will yield a $35.000 profit at the end of year 5; 7. Assume no tax is applied to the business; 8. The cost of capital for each investment is 10%. You are required to: Using an example, briefly explain to Mr. Dates what is meant by mutually exclusive investments. [5 Marks] Compute each investment's payback period. [5 Marks] Compute each investment's Net Present Value (NPV). Compute each investment's Internal Rate of Return (IRR). Which investment should Mr. Dates accept and why? Based on the above calculations and analysis, what has caused the ranking conflict? 1. iii. VI. vii. [8 Marks] [8 Marks] [8 Marks] [8 Marks] List two (2) disadvantages of using the NPV method in evaluating business investments. [8 Marks] Present value interest factor of an (ordinary) annuity of $1 per period at i% for n periods, PVIFA(i,n). Period 4% 5% 6% 7% 8% 0.980 0.971 0.962 0.952 0.943 0.935 0.926 1.913 1.886 1.859 1.833 1.808 1.783 2.884 2.829 2.775 2.723 2.673 2.624 2.577 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 4.853 4.713 4.580 4.329 4.212 4.100 3.993 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 6.728 6.230 6.002 5.786 5.582 5.206 5.033 5.535 7.652 7.020 6.733 6.463 6.210 5.747 8.566 7.786 7.435 7.108 6.802 6.247 5.995 8.983 8.530 8.111 7.722 7.360 7.024 9.253 8.760 8.306 7.887 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 1.759 1.736 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528 2.531 2.487 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106 3.240 3.170 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991 4.486 4.355 4.231 4.111 3.998 3.889 3.589 3.498 3.784 3.685 3.410 3.326 3.922 3.812 3.706 3.605 4.868 4.712 4.564 4.423 4.288 4.160 4.039 4.639 4.968 4.487 4.344 4.207 4.078 3.954 3.837 5.335 5.146 4.799 4.451 4.303 4.163 4.031 5.132 4.946 4.772 4.607 5.759 5.537 5.328 6.418 6.145 5.889 5.650 5.426 4.833 5.216 5.019 4.659 4.494 4.339 4.192 6.710 5.234 5.029 4.836 4.656 4.486 4.327 5.938 5.687 5.453 6.207 7.499 7.139 6.805 6.495 9.787 11 10.368 7.161 6.814 6.492 6.194 5.918 5.660 7.536 5.421 7.943 5.197 4.988 4.793 4.611 4.439 8.863 8.384 10.575 9.954 9.385 12 11.255 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533 7.487 7.103 7.904 8.358 8.853 9.394 11.348 10.635 9.986 13 12.134 6.982 6.002 5.724 5.468 5.229 5.008 4.802 4.611 8.244 7.786 7.367 6.628 6.302 8.745 9.295 12.106 10.563 9.899 14 13.004 11.296 8.559 5.575 5.324 5.092 4.876 4.675 8.061 6.811 9.108 7.606 7.191 6.462 6.142 5.847 12.849 10.380 15 13.865 11.938 8.313 6.974 7.824 7.379 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730 9.447 8.851 11.652 10.838 10.106 4.775 13.578 12.561 16 14.718 7.120 5.749 5.475 5.222 4.990 8.544 8.022 7.549 6.729 6.373 6.047 9.122 9.763 10.477 11.274 12.166 14.292 13.166 17 15.562 5.534 5.273 5.033 4.812 6.467 6.128 5.818 7.250 6.840 8.756 8.201 7.702 9.372 10.059 10.828 11.690 12.659 13.754 14.992 18 16.398 5.877 5.584 5.316 5.070 4.843 6.198 7.839 7.366 6.938 6.550 8.950 8.365 9.604 11.158 12.085 10.336 13.134 5.929 6.259 5.628 5.353 5.101 4.870 15.678 14.324 19 17.226 9.129 8.514 7.469 7.025 6.623 9.818 7.963 11.470 10.594 12.462 5.195 4.948 5.766 5.467 16.351 13.590 14.877 20 18.046 6.873 6.464 6.097 7.843 7.330 9.823 9.077 8.422 10.675 14.094 15.622 5.829 5.517 5.235 4.979 6.177 19.523 17.413 25 22.023 7.003 6.566 8.694 8.055 7.496 9.427 11.258 10.274 5.539 5.251 4.992 6.215 5.858 6.617 22.396 17.292 19.600 8.176 8.855 30 25.808 7.586 7.070 10.567 9.644 11.655 5.548 5.258 4.997 6.642 6.233 5.871 24.999 8.244 7.634 7.105 8.951 35 29.409 10.757 9.779 11.925 6.661 6.246 5.880 5.554 5.262 4.999 27.355 19.793 23.115 40 32.835 8.304 7.675 7.138 12.233 10.962 9.915 9.042 50 39.196 31.424 25.730 21.482 15.372 12.783 11.654 12.409 12.948 13.765 14.498 16.374 18.665 21.487 17.159 15.046 13.332 18.256 15.762 13.801 11 2 1.970 N3456 7 8 10 6.472 7.325 5.389 5.971 - 6.515 Present value interest factor of $1 per period at i% for n periods, PVIF(i,n). Period 3% 4% 5% 1 0.990 0.980 2 0.980 0.961 0.961 0.951 0.942 0.933 0.905 0.820 0.744 0.676 0.804 0.722 0.650 0.585 0.527 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 0.962 17% 0.952 18% 19% 0.943 20% 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.871 0.813 0.760 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.614 0.558 0.508 0.463 0.422 0.386 0.227 0.208 0.191 0.176 0.162 0.247 0.352 0.322 0.295 0.270 0.475 0.195 0.178 0.162 0.148 0.135 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.215 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.356 0.319 0.231 0.286 0.257 0.397 0.204 0.258 0.229 0.163 0.145 0.130 0.116 0.104 0.093 0.182 0.326 0.290 0.263 0.232 0.299 0.205 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.181 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.081 0.071 0.062 0.054 0.252 0.292 0.218 0.188 0.339 0.163 0.141 0.123 0.107 0.093 0.394 0.534 0.170 0.231 0.198 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 0.317 0.270 0.371 0.605 0.513 0.436 0.153 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.250 0.130 0.111 0.212 0.180 0.350 0.296 0.416 0.587 0.494 0.060 0.051 0.043 0.037 0.031 0.138 0.194 0.164 0.116 0.098 0.083 0.070 0.232 0.277 0.331 0.396 0.475 0.570 0.087 0.073 0.061 0.124 0.104 0.215 0.178 0.149 0.024 0.020 0.016 0.013 0.010 0.554 0.456 0.116 0.092 0.074 0.059 0.047 0.038 0.030 0.020 0.015 0.012 0.009 0.007 0.005 0.004 0.044 0.033 0.026 0.075 0.057 0.026 0.019 0.014 0.010 0.008 0.006 0.004 0.003 0.002 0.002 0.049 0.036 0.015 0.011 0.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0.032 0.022 0.013 0.009 0.005 0.003 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.788 0.701 0.625 0.557 0.497 0.444 0.681 0.601 0.530 0.469 0.415 0.368 0.661 0.577 0.505 0.442 0.388 0.340 0.642 0.555 0.481 0.623 0.728 0.458 0.700 0.828 0.686 0.051 0.043 0.037 0.031 0.026 0.312 0.377 0.258 0.820 0.673 0.295 0.184 0.233 0.478 0.780 0.610 0.375 0.231 0.308 0.412 0.146 0.099 0.174 0.131 0.742 0.094 0.068 0.552 0.130 0.181 0.253 0.355 0.500 0.142 0.208 0.307 0.453 0.087 0.141 0.372 0.228 0.046 0.067 0.097 0.021 0.034 0.054 4 5 B 9 INETSBES 15 0 0.887 0.879 0.870 0.861 0.853 0.706 0.672 0.608 0.758 0.971