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Payback, Accounting Rate of Return, Present Value, Net Present Value, Internal Rate of Return For discount factors use Exhibit 128.1 and Exhibit 120.2 All scenarios are independent of all other scenarios. Assume that all cash flows are after tax cash flows 3. Kombry Day is considering investing in one of the following two projects. Either project will require an investment or $20,000. The expected cash flows for the two projects follow. Assume that each project is depreciable. Project A Project Year 1 $ 6,000 $6,000 2 8,000 8,000 10,000 10,000 4 10,000 3,000 5 10,000 3,000 D. Wilma Golding is retiring and has the option to take her retirement as a lump sum of $450,000 or to receive $30,000 per year for 20 years. Wilmas required rate of return is 6% c. David Booth is interested in investing in some tools and equipment so that he can do independent drywalling. The cost of the tools and equipment is 530,000. He estimates that the return from owning his own equipment will be 59.000 per year. The tools and equipment will last 6 years d. Patsy Folson is evaluating what appears to be an attractive opportunity. She is currently the owner of a small manufacturing company and has the opportunity to acquire another small company's equipment that would provide production of a part currently purchased externally. She estimates that the Savings from internal production will be $75,000 per year. She estimates that the equipment will last 10 years. The owner is asing 5400,000 for the equipment Her company's cost of capital is 3%, Required: 1. Conceptual Connection: What is the payback period for each of kambry Day's projects? Round your answers to two decimal places, Project A 0.6 years Project B 2.6 years If rapid payback is important, which project should be chosen? Project A required, round to the nearest percent 2. Conceptual Connection: Which of Kambry's projects should be chosen based on the ARR? Accounting rate of return (ARR): Project A: ARR 44 % Project B: ARR 30 96 Project A 3. Assuming that Wilma Golding will live for another 20 years, should be take the lump sum of the annuity? Wiima should take the lump sum 4. Assuming a required rate of return or for David Booth, calculate the NPV or the investments if required, round to the nearest dollar NOV 5,934 Shoald David invest? Should David invest? Yes 5. Calculate the IRR for Patsy Folson's project. Round your answer to the nearest percent. 13.6 9 Should Patsy acquire the equipment? Yes WW 2 CORZOZO GROSE Exhibit 120.1 Present Value of a due of a Single Amount 19- 45 59 64 8. 94 10% 129 145 16% 18 20 259 10% 10.99010 0.950.19 0.97067 0.06154 0.95238 0.94340 0.93455 092593 091743 0.00009 0.10286 087719 0207 0.8746 0.83333 0.80000 0.76923 20.93030 0.96117 0.0426 0.92456 0.90701 0.19000 0.87344 0,65744 04168 0.82645 0.79719 0.76947 0.74316 0.71818 0.60444 0.64000 0 50172 3097059 094232 091514 0.000 0.86364 0.33962 0.81630 0.70383 0.77215 675131 0.71178 0.67497 064066 0.60563 0.57870 0:51 200 0.45517 4 0.90 0.92185 654905480 082270 0.79209 036290 0.750 0.70843 0.68301 0.63552 0 59201 0.55229 51579 0.48225 0.40960 01501 50.95747 0.00573 086261 0.82193 07351 0.74736 071209 0.66058 0.64993 062092 0.56743 051937 0.47611 0.43711 0.40188 0.12768 0.26011 6 094205 0.88707 0.83748 0.70011 074622 0.70496061614063017 0.59627 096447 0.50661 0.45550 041044 0.37043 0.33400 0.26214 0,2018 7 093272 087056 0.81309 5092 021060 66506 062275 0.5830 054703 0.51316 0452 0.10064 0.35383 0,1139 0.27008 0.20072 015037 $0.92341 0.85140 07041 0.75060 0.67614 0.62741 054201 0.54027 0.SOTNZ04651 0.40388 035056 030503 0.26664 0.22257 0.16777 0.1225 0.01434 083676 0.76642 070250 064461 50100 054393 0.0025 0.46043 042410 0.16061 0 10751 0.26295 0.22546 0.10381 0.13422 0.00430 10 0.90529 0.82035 0.74409 067556 061101 0.55610 5001 0.46310 0.42241 038554 0.12197 026074 022661 019106 0.16151 0.10737 0.07254 11 010612 0.80436 0.72242 0.64058 0.5668 0.52679 0.47509 0.4206038753 01510021745 02 0.19542 016192 0.13459 0,08500 BOSCO 12 0.18745 0.78540 0.70138 0.6240 0.55664 0.40097 0.44401 0.99711 0.15552 031 0.25665 0.70756 0.1646 0.11722 0,11216 0.06872 0.04292 11 A 0 0.60 0.60057 SO 040 0.41495 016770 0 12618 026 027 015207 0 14321 0.11629 0.00346 0.05098 0.03302 14 0.00 0.7578060112 0.9774350507 044230 08782034046 029975 0.20333 020462 015971 0.12520 0.00855 0.07780 004108 0.02540 15 0.61% 074101064186 0.5556 045102 041727 0.125 0.31524 0.27454 0.21910 010270 0.14010 0.10791 000152 006491 00118 0.01954 16 2 073 06221 0510 049 0.9365 0.3371 0 2019 025182 021709 0012 0.127800.0004 0.67078 0.05400 002015 0.01500 17. 071476051 0.43410022116 0.31657 0270022021107 0.1944 14564 0.10780 0.00021 098 00450706222601156 18 1602.0016 0.587 0,934 041557 0.1084 0.29536025025 021199 0.17986 0.13004 0.00456 0.00014 051 0.01756 0.01001 COBA 19 0.1 0.43 0.57029 0.6 0.19571 011051 0.27651 023171 0.1940 016351 0.11611 0.01295 0.051 0.04108 01110 001400.000 20 0.81054 067297 0.6 0.45619 01 01100 0.250 0.21455 017041 0.14364 0.10167 007276 0.05110 0.01651 0.02.08 0.01151 0.00536 21.0114 0755 041303 1804 0.9416 0.15 0.16 0.1610 0.11511 356 0.06183 0.0400003004 0.02114 0.00022 0.00105 22 0.010.1 0.421 014185 0.27751 0.22571 0.16194 0.11 0.12285 000509 001119 002622 0.01011 0.00738 0.00311 21 0.79544 0.6 0.50609 04057 0.12557 0.26100 0 21005 017012 018 01116 0.07199 00011001202 0.02222 0.01509 0.000 0.00270 24 078757 0.0172 040193 010012 0.11007 0.2460 019715 0.15720 0.12640 0.10153 0.06585 0.04108 0018 0.01 0.01258 0.00472 0,00114 25 07072 0.60051 0.47761 017512 0.205 30 0 2100 011425 0.14602 0.11597 0.00210 0.0 2 1779 0044 00156 001048 0.00178 0.00142 26 277205958460020124 0.31951 037220 01352010510 0801 00525200111 0.07109 001252 0.0004 0.00102 000100 27 076430 0556 0450100162 0.26735 0.20737 0.16003 0.12519 761 0.07628 0.0419000010011 001146 0.00739 0.00242 0.00054 2 0.564 57437 0.41 0.11 0.2 0.1956 0.15040 0.11591 0.00055 0.06014004167 0.02551 001567 0.00071 G 0.000 0.0006 29 000 0.4 0.12065 024295 11456 14056 0.0002 0.0004 0.01738 02217 001151 0.000006 0.00155 000 10 024192 055207 0.41199 0.1082 3311 1741 11 91 0.07512 0.0571 001133001951 0.01 0.00 0.00421 0.00114 000 RISO ESTO O WOW SITO SONO NO ISOO DAILY Exhibit 120.2 Present Value of an Annuity 9 E "VOE 19 2 3 44 54 69 74 8% 94 104 12 14% 169 18% 20% 25 1 099030 0.00010 097067 096154 095238 094340 093458 0.92501 0.0172 0.00900 0.89256 0.67719 036203 0.34746 0.03333 0.0000 0.76923 2 97040 104156 1.9147 148609 1.8541 1.83330180802172326 1.75911173554 1.CROOS 164666 1.60522 1.56564 1.52778 144000 115095 3204099 28381 282061 277500 2.72125 2.67301 262412 257710 281129248685 2:40183 212163 224580 21747 2.10646 1.95200 139611 4 390197 80773 1710 3.62990 154595 146511 1.38721 131213 121972 1.16957 303735 201171 2.79318 2.60006 2.58872 2.36160 2.16624 S943 71346 2.57971 4451323245 421236 4.10020 9927138896570079 3.60478 47306 327420 2.12712 2.99061 268978 2.43557 6579545 5.60143 5.41719 524214 3.07569 491712 4.76654 4.62288 4.48592415526 4.11141 388367 368474 3.49760 332551 295142 254275 7 2019 647109 623023 600205 5.71437 8.58235 S 1929 20637 50129548682 456376 28930 403257 281151 3.60459 116114 280211 765108717541 1,01969 6.73274 640121 6.70979 5.97110 574664551625.31493 4.96764 63864150407757381716132801 2.92470 562 1.16224778611 743533 10782 6.000 $152362460 5.99525 5.75902532825 494637 460654 430302 403097 1461 101000 10247130 .03250 151000 11000 7.7217373000 702358 671008 641766614457 565022 621612 423321 440409 410247 1.7050 3,00154 11 10 16/53 0.7845 25262 3.76048 810641 749567 7.13896 630519 6.40506 501770 545271 5.02864 465601 432706 165640 110 12.11.2008 1037534 05400807 61258383847439 7510 7160736811606.19417 564029 519711470122 441922 1.7251210076 1112017411 1482 106308695019357 35761 1765 790175 748690710316 615 3016 1423) 40951 4520271010322378 14 11.00370 12.1005 11 2007 10 5631204029499274507120471612 662017600207 546751 S00106 461057 1.8200 1.2407 15. 12.049241.9370411110 10179661225 10701 550 000 2.00 104 614217 57546 5.0015840542 1.52 126621 16 1671/871377211250110116520 10.41777 10.1058044665 885137 8.312567.82171 6070 6.656 SRO 516335 4.72056 18574112124 17 15.50225 123011711141212165471127607 10.477267622 912164 85836702155 7.1963 374 574870522221 477461100001 120480 I 110271499301117535112659101110274010 00037189 8.755613 2014 297 646742 511785 5.27316461219 199704 1300 19 17.2200115.0041417101111104120351211141210 126.6030 8950113600275 655037 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