Use Echibit 123.1 and Exhibit 128.2 to locate the present value of an annuity of $1, which is the amount to be multiplied times the future annual cash flow amount. Each of the following scenarios is independent. Assume that all cash flows are after tax cash flows. a. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $2,850,000 and will last 10 years. b. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $330,000. She estimates that the return from owning her own shop will be $40,000 per year. She estimates that the shop will have a useful life of 6 years. c Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after tax cash flows of $135,000. Required: 1. Compute the NPV for Campbell Manufacturing, assuming a discount rate of 12%. If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a negative NPV. 4,466 x Should the company buy the new welding system? 2. Conceptual Connection: Assuming a required rate of return of 8%, calculate the NPV for Evee Cardenas' investment. Round to the nearest dollar. If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a negative NPV. 24,569 x Should she invest? What if the estimated return was 5135.000 per year? Calculate the new NPV for Ever Cardenar investment. Would this affect the decision? What does this tell you about your analysis? Round to the nearest dollar 48,777 X S The shop should be purchased. The reveals that the decision to accept the case is affected by differences in 2. Conceptual Connection: Assurning a required rate of return of 8%, calculate the NPV for Evee Cardenas' investment. Round to the nearest dollar. If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a negative NPV. $ 24,569 X Should she invest? No What if the estimated return was $135,000 per year? Calculate the new NPV for Evee Cardenas' investment. Would this affect the decision? What does this tell you about your analysis? Round to the nearest dollar. 48,777 X be purchased. This reveals that the decision to accept or reject in this case is affected by differences in The shop should now estimated cash flow 3. What was the required investment for Barker Company's project? Round to the nearest dollar. If required, round all present value calculations to the nearest dollar. 6,898 x Net Present Value (NPV): NPV = P. The difference between the present value of future cash flows and the initial investment outlay. Apply the discount factor derived from the table to the cash flows. Use the given interest rate (required rate of retum, discount rate cost of city with ether Exhibit and the appropriate cash flow 1. Use the information in (a) to calculate NPU 2. Use the information in (5) to calculata NPV. Then adjust the amounts and recalculate NPV. 3. Use the information in (c) to calculate the initial instant - PINOY Exhibit 123.1 Present Value of a Single Amount 10% 12% 14% 16% 18% 20% 25% 30% 1 0.00010 0.00019 0.97087 0.96154 0.95238 0.94340 0.93458 0.92593 0.91743 0.90909 0.89286 0.87719 0.86207 0.84746 0.83333 0.80000 0.76923 2 0.98030 0.96117 0.04260 0.92456 0.90703 0.89000 0.87344 0.85734 0.84168 0.82645 0.79719 0.76947 0.74316 0.71818 0.69444 0.64000 0.59172 3 0.97059 0.04212 0.91514 0.88900 0.86384 0.83962 0.81630 0.79383 0.77218 0.75131 0.71178 0.67497 0.64066 0.60863 0.57870 0.51 200 0.45517 4 0.96098 0.92385 0.88849 0.85480 0.82270 0.79209 0.76290 0.73503 0.70843 0.68301 0.63552 0.59208 0.55229 0.51579 0.48225 0.40960 0.35013 5 0.95147 0.90573 0.86261 0.82193 0.78353 0.74726 071299 0.68058 0.64993 0.62092 0.56743 0.51937 0.47611 0.43711 0.40188 0.32768 0.26933 6 0.94205 0.88797 0.83748 0.79031 0.74622 0.70496 0.66634 0.63017 0.59627 0.56447 0.50663 0.45559 0.41044 0.37043 0.33490 0.26214 0.20718 7 0.93272 0.87056 0.81309 075992 0.71068 0.66506 0.62275 0.58349 0.54703 0.51316 0.45235 0.39964 0.35383 0.31393 0.27908 0.20972 0.15937 8 0.92348 0.85349 078941 0.73069 0.67684 0.62741 0.58201 0.54027 0.50187 0.46651 0.40388 0.35056 0.30503 0.26604 0.23257 0.16777 0.12259 9 0.91434 0.83676 0.76642 0.70259 0.64461 0.59190 0.54393 0.50025 0.46043 0.42410 0.36061 0.30751 0.26295 0.22546 0.19381 0.13422 0.09430 10 0.90529 0.82035 0.74409 0.67556 0.61391 0.55839 0.50835 0.46319 0.42241 0.38554 0.32197 0.26974 0.22668 0.19106 0.16151 0.10737 0.07254 11 0.89632 0.80426 0.72242 0.64958 0.58468 0.52679 0.47509 0.42888 0.38753 0.35049 0.28748 0.23662 0.19542 0.16192 0.13459 0.08590 0.05580 12 0.88745 0.78849 0.70138 0.62460 0.55684 0.49697 0.44401 0.39711 0.35553 0.31863 0.25668 0.20756 0.16846 0.13722 0.11216 0.06872 0.04292 13 0.87866 0.77303 0.68095 0.60057 0.53032 0.46884 0.41496 0.36770 0.32618 0.28966 0.22917 0.18207 0.14523 0.11629 0.09346 0.05498 0.03302 14 0.86996 0.75788 0.66112 0.57748 0.50507 0.44230 0.38782 0.34046 0.29925 0.26333 0.20462 0.15971 0.12520 0.09855 0.07789 0.04398 0.02540 15 0.86135 0.74301 0.64186 0.55526 0.48102 0.41727 0.36245 0.31524 0.27454 0.23939 0.18270 0.14010 0.10793 0.08352 0.06491 0.03518 0.01954 16 0.85282 0.72845 0.62317 0.53391 0.45811 0.39365 0.33873 0.29189.0 25187 0.21763 0.16312 0.12289 0.09304 0.07078 0.05409 0.02815 0.01503 17 0.84438 0.71416 0.60 502 0.51337 0.43630 0.37136 0.31657 0.27027 0.23107 0.19784 0.14564 0.10780 0.OBOZ1 0.05998 0.04507 0.02252 0.01156 18 0.03602 0.70016 0.58739 0.49363 0.41552 0.35034 0.29586 0.25025 0.211990 17986 011004 0.09456 0.06914 0.05083 0.03756 0.01801 0.00889 19 0.82774 0.68643 0 57029 0.47464 0.39573 0.33051 0.27651 0.23171 0.19449 0.16351 0.11611 0.08295 0.05139 0.04308 0.03130 0.01441 0.00684 20 0.81954 0.67297 0.55368 0.45639 0.37689 0.31180 0.25842 0.21455 0.17843 0.14864 0.10367 0.07276 0.05139 0.03651 0.02608 0.01153 0.00526 21 0.81141 0.65078 051755 0.41883 0.35894 0.29416 0.24151 0.19866 0.163700-1351 0.09256 0.06181 004430 001004 002174 0.00922 0.00405 22 0.80140 0.64684 0.52189 0.42196 0.34185 0.27751 0.22571 0.18394 015018 0.12285 0.08264 0.05599 0.03819 0.02622 0.01811 0.00738 0.00311 21 0.79544 061416 0 50669 0.40571 0.12557 0.26180 0.21095 0.17012 0.13778 0.11168 0.07170 0.01011 0.02202 0.02222 0.01500 0.00590 0.00239 24 0.78757 0.62172 0.49193 0.39012 0.31007 0 24698 019715 0.15770 0 12640 0 10153006588 0.04308 0.02838 0.01883 0.01258 0.00472 0.00184 25 0.77977 0.60953 0.47761 0.17512 0.29530 0.23300 0.18425 0.14602 0.11597 009230 005882 0.03779 002447 001596 0.01048 0.00378 0.00142 26 0.77205 6.50758 0.46369 016060020124 0 21951 0.17220 0.13520 0.10639 00 0 05252003200109 001352 0.00874 0.00302 0.00109 27 0.76440 0.58586 0.45019 0.34682 0.26785 0.20737 0.16093 0.12519 0.09761 007628 0.04659 0.02908 0.01818 0.01146 0.00728 0.00242 0.00084 28 0.75684 0.57417 0.43708 031348 0 255000 10567 0.15040 0.11501 0.0895500693400132 02551 0.01567 0.00021 0.00607 0.00191 0.00065 29 0.74934 0.56311 0.42435 0.32065 0 24295 0.16456 0.14056 0.10731 008215 0.06304 0 2237 001351 0.00823 0.00506 0.00155 0.00050 30 074192 0 55207 041199 0 30832 0 23118 0.17411 0.313 0.090 18 007537 0.05771 002 00196001165 000697 0.00421 0.00124 0.00038 // Exhibit 120.2 Present Value of an Annuity 1 2 19 495 % 6% 7% 8% 9% 10% 12% 14% 16% 18% 20% 25% 30% 1 0.99010 0.98039 0.97087 0.96154 0.95238 0.94340 0.93458 0.92593 0.91743 0.90909 0.89286 0.87719 0.86207 0.84746 0.83333 0.80000 0.76927 2 1.97040 1.94156 1.91347 1.88609 1.85941 1.83339 1.80802 1.78326 1.75911 1.73554 1.69005 1.64666 1.60523 1.56564 1.52778 1.44000 1.36095 3 2.94099 2.88388 2.82861 2.77509 2.72325 2.67301 2.62432 2.57710 2.53129 2.48685 2.40183 2.32163 2.24589 2.17427 2.10648 1.95200 1.81611 3.90197 3.80773 3.71710 3.62990 3.54595 3.46511 3.38721 3.31213 3.23972 3.16987 3.03735 2.91371 279818 2.69006 2.58873 2.36160 2.16624 5 4.85343 4.71346 4.57971 4.45182 4.32948 421236 4.10020 3.99271 3.88965 3.79079 3.60478 3.43308 3.27429 3.12717 2.99061 2.68928 2.43557 6 5.79548 5.60143 5.41719 5.24214 5.07569 4.91732 4.76654 4.62288 4.48592 4.35526 4.11141 3.88867 3.68474 3.49760 3.32551 2.95142 2.64275 7 6.72819 6.47199 6.23028 6.00205 5.78637 5.58238 5.38929 5.20637 5.03295 4.86842 4.56376 4.28830 4.03857 3.81153 3.60459 3.16114 2.80211 8 7.65168 7.32548 7.01969 6.73274 646321 6.20979 597130 574664 5.53482 5.33493 4.96764 4.63886 434359 4.07757 3.83716 3.32891 2.92470 9 8.56602 8.16224 7.78611 7.43533 7.10782 6.80169 6.51523 6.24689 5.99525 5.75902 5.32825 4.94637 4.60654 4.30302 4.03097 3.46313 3.01900 10 9.47130 8.98250 8.53020 8.11090 7.72173 7.36000 7.02358 671008 6,417666.14457 5.65022 5.21612 4.83323 4.49409 4.19247 3.57050 1.09154 11 10.36763 9.78685 9.25262 8.76048 8.30641 7.88687 7.49867 7.13896 6.80519 6.49506 593770 5.45273 5.02864 4.65601 432706 1.65640 11074 12 11.25508 10.57534 9.95400 9.38507 8.86325 8.38384 794260 7.53608 7.160736.81369 6.19437 5.66029 5.19711 4.79322 4.43922 3.72512 3.19026 13 12.11174 11.34837 10.63496 9.98565 9.39357 8.85268 8.35765 7.90378 7.486907.10336 6.42355 5.84236 5.34233 4.90951 4.53268 3.78010 3.22328 14 13.00370 12.10625 11.29607 10.56312 9.89864 9.29498 8.74547 8.24424 7.78615 7.36669 6.62817 6.00207 5.46753 5.008064.61057 3.82408 3.24867 15 13.86505 12.84926 11.93794 11.11839 10.37966 9.71225 9.10791 8.55948 8.06069 7.60608 681086 6.14217 5.57546 5.09158 4.67547 185926 126821 16 14.71787 13.57771 12.56110 1165230 10 83777 10.105909.44665 8.85137 8.312567.82371 697399 6.26506 5.66850 5.16235 4.72956 3.88741 3.28324 17 15.56225 14.29187 13.16612 12.16567 11 27407 10.47726 976322 9.12164 8.54363802155 7.11963 6.37286 5.74870 5.2223) 4.77463 3.90993 3.29480 18 16.39827 14.99203 13.75351 12.65930 11.68959 10.82760 10.05909 9.37189 8.75561 8. 20141 7.24967 6.46742 5.81785 5.27316 4.81219 3.92794 330369 19 17.2260115.67846 14 1218011.131941205532 11.15812 10.31560 9.60160895011.16492 7.6578 655017 5.87746 531624 4341010215 110 20 18.04555 16,3514) 14.87747 11 50033 12 46221 11.46992 10.59401 9.81815 912855 8.51856 746044 6.62313 5.92884 5.35275 486958 195788 3.31579 21 18.85608 17.0112115.41502 14.0291612.62115 11.76408 10.81558 10.01680 9.29224 8 64860756200 6.6606 5.97314 5.38368480132 196111 1084 22 19.66018 17 65805 15.93692 14 45112 13 16100 12041581106124 10.20074 9442437154164465 674294 601 540000 4.90941 197049 112296 23 20.455871829220 16.44361 14 35684 13.4585712.30138 11.27219 10.37106 95802188322 7134 6 79206 6.04425 543212 492453 107610212535 24 21.24339 16.91303 1693554 15.24696 13798641255036 11.46933 10.52876 9.70668954747.78432 6815146.072615.45095 491710198111 112719 25 22.02316 19.52346 17.413151562208 14.09194 12 78736 1165358 10.67478 0.822589.07704 7.84314 6.87201 6.00700 $46601494759 1014892 861 26 2279520 20.12104 17.87684 15.98277 14 37519 13.00317 11.82578 10.80998 9.92897 9.160957 19566 6.90608 6.11818 5.48043 495632 1 98791 312970 27 23.55961 2070090 18.32703 16.32959 14.643031321053 11.98671 10.9351610026589 23722 7.94255 693515 613636 5.49189 4.96360 1.0903331054 28 243164421.28127 18.7641116.66306 14.89813 13.4061612117111105108 10.11613 9.10657 7.08442 606066615204 5.50160496067100226 HR 29 25.06579 21.84438 19.18845 16.98371 15.14107 13 59072 12.2776711.15841 10.19828 9. 16061 8.02181 6.98304 6.16556 .5098) 4.974729938331168 30 25 80771 22.39646 19 60044 17 29203 15 17245 1176483 12 40904 11 25778 10 2716542691 8.05518 700766 6. 17720 5 51681 497894 39505 1206 1801150250022 1315150013 86423033812