Question 2 Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $117,571 and have an estimated useful We of 5 years. It can be sold for $60,000 at the end of that time. Amusement parks need to rotate exhibits to keep people interested. It is expected to increase net annual cash flows by $20,000. The company's borrowing rate is 8%. Its cost of capital is 10%. Click here to view PV table Calculate the net present value of this project to the company and determine whether the project is acceptable. (If the net present value is negative use either a nedarve son precong the number eg 15 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to decimal places, e.g. 125.) Net present value The project Click if you would like to show Work for this question: Open Show Work CALCULATOR PRINTER VERSION BACK NEXT Question 3 Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $167,500 and has an estimated useful le of years with zero salvage value Management estimates that the new bottling machine will provide net annual cash flows of $34,800. Management also believes that the new bottling machine will save the company money because it is expected to be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 15%. Click here to view pytable, Calculate the net present value. If the net present value is negative, use either a n ative sin preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to o decimal places, e.g. 125.) Net present value How much would the reduction in downtime have to be worth in order for the project to be acceptable? (Round answer to 0 decimal places, e.g. 125.) Question 4 Mcknight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $411,000, has an expected useful We of 11 years, a salvage Value of zero, and is expected to increase net annual cash flows by $71,000. Project B will cost $273,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $48,800. A discount rate of 10% is appropriate for both projects. Click here to view it Compute the net present value and profitability index of each project. If the nel present value is negative, use either a negative sign preceding the number og or parentheses eg (45). Round present value answers to o decimal places, e.o. 125 and profitability index answers to 2 decimal places, e.. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value - Project A Profitability index - Project A Net present value - Project B Profitability index - Project B Which project should be accepted based on Net Present Value? should be accepted. Which project should be accepted based on profitability index? should be accepted
