Question
Refit A Refit B Initial investment (CFo) $120,000 $78,000 Cash flow savings in year (t): 1 $22,000 $41,000 2 $36,000 $33,000 3 $44,000 $31,000 4
Refit A Refit B Initial investment (CFo) $120,000 $78,000 Cash flow savings in year (t): 1 $22,000 $41,000 2 $36,000 $33,000 3 $44,000 $31,000 4 $51,000 $12,000 5 $57,000 $4,000 You are the CEO of a company that manufactures N95 masks and other PPE. You have 6 manufacturing facilities nationwide. The lighting in all these facilities is based on old conventional lightbulb technology. You are considering refitting the factories with new LED lighting, which consumes less electricity. You have received two proposals to refit the factories described as A and B above. The electricity cost savings for each proposal is also listed above.
- Which refit would you prefer? Explain why.
- You have approached a bank to loan you the money for the refits, proposing a 10% interest rate. As a banker, which refit would you prefer to lend against ("Both" or "none" are not acceptable answers.)
- Use your financial calculator to come up with "part" of the answer.
- Try to calculate the Internal Rate of Return for both refits.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started