Question
Please help me fulfill the following XML information You have been hired by a midsize copper smelting company in northern Canada to act as a
Please help me fulfill the following XML information
You have been hired by a midsize copper smelting company in northern Canada to act as a consultant to help the executive team to determine its best course of action on a major decision. Due to some recent changes to the local environmental air quality laws, the company's large coal-fueled smelting furnace is now operating out of compliance due to high levels of pollutants in the exhaust gases. The regulatory agency has given the company 12 months to demonstrate compliance, after which it will be fined a $1,000 per day until the operations meets the regulation. The company has two alternatives. The first alternative is to install air-scrubbers to reduce the output pollutant levels. The second alternative is to convert the smelting furnace from coal to natural gas. Both alternatives will meet the current regulatory requirements, but there is a slight concern that the air-scrubber solution may not meet future regulatory restrictions. The executive team wants you to perform a financial performance analysis on both alternatives using several different capital budgeting methodologies. The team also is seeking guidance on non-financial considerations regarding the company's ethical and social responsibilities related to this decision.
*****The project life must have a value of 15 years
Air Scrubbers Furnance Fuel Change IRR Worksheet IRR Worksheet Period Cash Flow Period Cash Flow 0 0 H 2 2 3 A CO CO 9 9 10 10 11 11 12 12 13 13 14 14 15 15Air Scrubbers Furnace Air Scrubbers Furnace Fuel Change Required Investment 225,000 $ 150,000 Year Average Net Income Average Book Year Average Average Book Annual Cash Flows 60,000 $ 56,000 1 38,000 $ 217,500 1 34,000 $ 145,000 Annual Net Income 38,000 $ 34,000 38,000 202,500 34,000 135,000 Project Life 15 years 15 years 38,000 187,500 34,000 125,000 UP WN Average Book Value S 112,500 $ 75,000 38,000 172,500 34,000 115,000 Cost of Capital 10% 10% 38,000 157,500 34,000 105,000 SL CO VG UI A W N 38,000 142,500 6 34,000 95,000 38,000 127,500 7 34,000 85,000 38,000 112,500 8 34,000 75,000 38,000 97,500 9 34,000 65,000 38,000 82,500 10 34,000 55,000 11 38,000 67,500 11 34,000 45,000 12 38,000 52,500 12 34,000 35,000 13 38,000 37,500 13 34,000 25,000 14 38,000 22,500 14 34,000 15,000 15 38,000 7,500 15 34,000 5,000 Average $ 38,000 $ 112,500 Average $ 34,000 $ 75,000Air Scrubbers Furnace Fuel Change Net Present Value using the Annuity Table to determine PV of cash flow Net Present Value using the Annuity Table to determine PV of cash flow NPV = Initial Cost + (Net Annual Cash Flow x Factor) Amount Factor Present Value NPV = Initial Cost + (Net Annual Cash Flow x Factor) Amount Factor Present Value Initial investment 15 Initial investment 1 S PV of Annual net cash flow for 15 years PV of Annual net cash flow for 15 years Net present value Net present value $ OR OR Net Present Value Using Excel to determine PV cash flow Net Present Value Using Excel to determine PV cash flow NPV = Initial Cost + PV of Cash Flow Present Value NPV = Initial Cost + PV of Cash Flow Present Value Initial investment Initial investment PV of Annual net cash flow for 15 years =PV(rate, value1,[value2]) PV of Annual net cash flow for 15 years =PV(rate, value1,[value2]) Net present value Net present value Payback Period = Initial Investment / Net Annual Cash Flow Payback Period = Initial Investment / Net Annual Cash Flow Internal Rate of Return Internal Rate of Return Using Annuity Table Using Annuity Table OR OR Using Excel =IRR(M6:M21) use the IRR worksheet Using Excel =IRR(M26:M41) use the IRR worksheet Average Rate of Return = Ave Net Income / Ave Book Value of investment Average Rate of Return = Ave Net Income / Ave Book Value of investmentStep by Step Solution
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