Question #1

The following table indicates the net cash flows of a capital asset:

Year	Net Cash Flow
0	$-8,400
1	$5,900
2	$6,200

Do not enter dollar signs or commas in the input boxes. Use the negative sign where appropriate. Round the factor to 4 decimal places and the NPV to the nearest whole number. Assume the required rate of return is 15%. Determine the net present value of this asset.

Year	Net Cash Flow	Factor	Net Present Value
0	$-8,400	1	$-8400
1	$5,900	Answer ?	$Answer ?
2	$6,200	Answer ?	$Answer ?
Total			$Answer ?

Question #2

Fill in the blanks for each of the following independent scenarios (A-D).

Do not enter dollar signs or commas in the input boxes. Round all answers to the nearest whole number.

Scenario	A	B	C	D
Annual Net Cash Flow	$13,000.00	$Answer ?	$11,000.00	$8,000.00
Discount Rate	11%	7%	5%	6%
Number of Payments	7	7	7	2
Present Value of Annuity Factor	4.7122	5.3893	5.7864	1.8334
Present Value of Annuity	$61259	$215,572.00	$63650	$14,667.20

Question #3

Two days ago, one of Morees Catering Inc.'s delivery vans stopped working. To meet demands, the company needs a new van. The company is deciding to either lease or purchase a new van. The company can lease the van from Leaselt Ltd. under a 4 year contract. The lease cost would be $11,200 per year. On the other hand, Morees can purchase a van from BuyIt Ltd. for $46,100. Assume Morees has a required rate of return of 9%.

Do not enter dollar signs or commas in the input boxes. Use the present value tables found in the textbook appendix. Round your answer to the nearest whole number. Use the NPV method to determine which alternative the company should accept. Lease Cost: $Answer ? Purchase Cost: $Answer ? Therefore, Morees should: Lease

Question #4

Harold Coop is considering investing in either ABC or ZYX. Both investments ABC and ZYX cost $17,000. In order to make the purchase, Harold Coop needs to obtain a loan from the bank at an interest rate of 4%. The bank is only willing to offer Harold Coop $17,000. The following table outlines the expected net cash flows from each investment.

Year	ABC	ZYX
1	$700	$12,400
2	$1,100	$3,200
3	$3,200	$3,700
4	$6,800	$1,500
5	$9,700	$700
Total	$21,500	$21,500

Based on the NPV method, which investment should Harold Coop purchase? Do not enter dollar signs or commas in the input boxes. Use the negative sign for a negative NPV. Use the PV tables in the appendix of the textbook. Round your answers to the nearest whole number. NPV of Investment ABC: $Answer ? NPV of Investment ZXY: $Answer ? Better Investment: Answer ABCZYX

Question #5

Tippy Toe Spa Company offers various services, such as facials, laser hair removal and microdermabrasion. Currently, the company is considering purchasing the following spa equipment:

	Laser Hair Removal Machines	Microdermabrasion Machines	Facial Oxygen Units
Cost per Machine	$65,700	$31,900	$25,400
Annual Cash Inflow	$124,300	$211,300	$39,700
Annual Cash Outflow	$89,300	$195,800	$26,900
Required Rate of Return	10%	13%	5%
Useful Life	4 years	4 years	2 years
Residual Value	$860	$830	$0

Assume that each equipment's annual cash flow will occur for the period equal to its useful life. Do not enter dollar signs or commas in the input boxes. Use the present values tables in the textbook appendix. Use the negative sign for negative values. Round your answers to the nearest whole number. a) Determine the NPV of each piece of equipment. Laser Hair Removal Machine: $Answer ? Microdermabrasion Machine: $Answer ? Facial Oxygen Unit: $Answer ? b) For each piece of equipment, determine the maximum acceptable price using the NPV method. Laser Hair Removal Machine: $Answer ? Microdermabrasion Machine: $Answer ? Facial Oxygen Unit: $Answer ? c) Determine the payback period for each piece of equipment. Round your answers to 1 decimal place. Laser Hair Removal Machine: Answer Years ? Microdermabrasion Machine: Answer Years ? Facial Oxygen Unit: Answer Years ?

Question #6

The Georgio Hotel Corporation is considering replacing its old hot tub with a new one at a cost of $26,000. With the new hot tub, the company expects to save $5,000 in maintenance costs per year, all cash savings. These savings in maintenance costs represent both an increase in cash flow and an increase in incremental operating income. The new hot tub has an estimated useful life of 5 years with no residual value. The company's required rate of return is 6%. The old hot tub has no residual value.

Do not enter dollar signs or commas in the input boxes. Use the present value tables found in the textbook appendix. Use the negative sign for negative values. Round all answers to 2 decimal places. a) Assume the company wants to recover their initial investment on the new hot tub in five years. Based on the payback method, should the hotel purchase the new hot tub? Cash Payback Period: Answer 5.2 years Should the hotel purchase the new hot tub?: Answer No

b) If the ARR method is used, should Georgio Hotel purchase the new hot tub? ARR: Answer 38.46% Should the hotel purchase the new hot tub?: Answer Yes

c) If the NPV technique was used, should Georgio Hotel purchase the new hot tub? Round your answer to the nearest whole number. NPV: $Answer ? Should the hotel purchase the new hot tub?: Answer No