Requirements:
Use the NPV method to determine whether Stenback Products should invest in the following projects: Project A: Costs $265,000 and offers seven annual net cash inflows of $54,000. Stenback Products requires an annual return of 14% on investments of this nature. Project B: Costs $390,000 and offers 10 annual net cash inflows of $70,000. Stenback Products demands an annual return of 12% on investments of this nature. Present Value of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% 16% 18% 20% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0.847 0.833 Period 2 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.797 0.769 0.756 0.743 0.7180.694 Period 3 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.712 0.675 0.658 0.641 0.6090.579 Period 4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.636 0.592 0.572 0.552 0.516 0.482 Period 5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.567 0.519 0.497 0.476 0.4370.402 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.6660.630 0.596 0.564 0.507 0.456 0.432 0.410 0.370 0.335 Period 7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.452 0.400 0.376 0.354 0.3140.279 Period 8 0.923 0.853 0.789 0.731 0.677 0.627 0.5820.540 0.502 0.467 0.404 0.351 0.327 0.305 0.266 0.233 Period 9 0.914 0.837 0.766 0.703 0.645 0.592 0.5440.500 0.460 0.424 0.361 0.308 0.284 0.263 0.225 0.194 Period 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.322 0.270 0.247 0.227 0.191 0.162 10 Period 110.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.3880.350 0.287 0.237 0.215 0.195 0.162 0.135 Period 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.257 0.208 0.187 0.168 0.137 0.112 12 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.3260.290 0.229 0.182 0.163 0.145 0.116 0.093 Period 13 Period 14 Period 15 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.205 0.1600.141 0.125 0.099 0.078 10.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.183 0.140 0.123 0.108 0.084 0.065 0.853 0.728 0.623 0.534 0.458 0.394 0.3390.292 0.252 0.218 0.163 0.123 0.107 0.093 0.0710.054 0.844 0.714 0.605 0.513 0.436 0.371 0.3170.270 0.231 0.198 0.146 0.108 0.093 0.080 0.060 0.045 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.130 0.095 0.081 0.069 0.051 0.038 Period 16 Period 17 Period 18 Period 19 Period 20 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.116 0.083 0.070 0.060 0.043 0.031 0.820 0.673 0.554 0.456 0.377 0.312 0.258 0.215 0.178 0.149 0.104 0.073 0.061 0.051 0.037 0.026 10.811 0.660 0.538 0.439 0.359 0.2940.242 0.199 0.1640.135 0.093 0.064 0.053 0.044 0.031 0.022 Period 21 4% Present Value of Ordinary Annuity of $1 Periods 1% 2% 3% 5% 6% 7% 8% 9% 10% 12% 14% 15% 16% 18% 20% Period 1 0.990 0.980 0.971 0.962 0.9520.943 0.935 0.926 0.917 0.909 0.8930.877 0.870 0.862 0.847 0.833 Period 2 1.970 1.942 1.9131.886 1.859 1.8331.8081.7831.759 1.736 1.6901.647 1.626 1.605 1.566 1.528 Period 3 2.9412.884 2.8292.775 2.7232.6732.624 2.577 2.531 2.487 2.402 2.3222.283 2.246 2.174 2.106 Period 4 3.902 3.808 3.7173.630 3.546 3.465 3.3873.312 3.240 3.170 3.0372.914 2.855 2.798 2.690 2.589 Period 5 4.853 4.713 4.580 4.452 4.3294.212 4.100 3.993 3.890 3.791 3.605 3.433 3.352 3.274 3.127 2.991 Period 6 5.795 5.601 5.417 5.242 5.0764.9174.767 4.623 4.486 4.355 4.111 3.8893.784 3.685 3.498 3.326 Period 7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.564 4.288 4.160 4.039 3.812 3.605 Period 8 7.652 7.325 7.020 6.733 6.463 6.210 5.9715.747 5.535 5.335 4.968 4.639 4.487 4.344 4.0783.837 Period 9 8.566 8.1627.786 | 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.328|4.9464.772 4.607 4.303 4.031 Period 10 9.4718.983 8.530 8.1117.722 7.360 7.024 6.710 6.418 6.145 5.6505.216|5.019 4.833 4.494 4.192 Period 1110.368 9.787 9.2538.760 8.306 7.8877.499 7.139 6.8056.495 5.938 5.453 5.234 5.029 4.656 4.327 Period 12 11.255 10.575 9.954 9.385 8.8638.384 7.9437.536 7.1616.814 6.194 5.660 5.421 5.197 4.793 4.439 Period 1312.134 11.348 10.635 9.986 9.394 8.8538.358 7.904 7.487 7.103 6.424 5.842 5.583 5.342 4.910 4.533 Period 1413.00412.106 11.29610.563 9.899 9.295 8.745 8.244 7.786 7.367 6.6286.0025.724 5.468 5.008 4.611 Period 1513.86512.849 11.938 11.11810.380 9.712 9.108 8.559 8.061 7.606 6.811 6.1425.847 5.575 5.092 4.675 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. 2. What is the maximum acceptable price to pay for each project? 3. What is the profitability index of each project? Round to two decimal places. Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A. Project A: Net Cash Annuity PV Factor Present Years Inflow (i=14%, n=7) Value 1-7 Present value of annuity 0 Investment Net present value of Project A
