Planters Products enjoys a steadily demand for peanuts, Revenues from the roasted peanuts are $ 50 million per year, and production costs are $ 47. 5 million. However, the precision Munster deshelling machines that are used in the production process are coming to the end of their useful life. One possibility is simply to replace each existing machine with a new Munster, These machines would cost $ 800,000 each and would not involve any additional operating costs. The alternative is to buy 10 centrally controlled stillborn deshelling machines, Skillboros cost $ 1. 2 million each, but compared with the Munster, they would produce a total saving in operator and material costs of $ 1 million a year. Moreover, the Skillboro is sturdily built and would last 10 years, compared with an estimated 7-year life for the Munster Planters opportunity cost of capital is 15%.

Analyzes in the desalination division would like you to create a spreadsheet, which shows the forecast of total cash flows over the life of each machine, Planters' standard procedures for assessing capital investments involve calculating net present value, internal rate of retur, and payback period so you will need to calculate all three (for each machine) in your spreadsheet Finally, (also in your spreadsheet), you will need to recommend that Planters purchase either the Munster machines or the Skillboro machines.

It should be an Excel spreadsheet with some type of layout similar (or identical with numbers, of course) to the one below. You can use formulas for NPV (= NPV (rate, B8: B14) - B7 (IRR) IRR (B7: B14))