Use the NPV method to determine whether Stenback Products should invest in the following projects: Project A: Costs $280,000 and offers seven annual net cash inflows of $54,000. Stenback Products requires an annual return of 12% on investments of this nature. Project B: Costs $380,000 and offers 9 annual net cash inflows of $78,000. Stenback Products demands an annual return of 10% on investments of this nature. (Click the icon to view Present Value of $1 table.) Click the icon to view Present Value Ordinary Annuity of $1 table.) Read the requirements Requirement 1. What is the NPV of each project? Assume nelther 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 Jalue.) 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=12%, n=7) Value - 1-7 Present value of annuity 0 Investment Net present value of Project A Calculate the NPV of Project B. Project B: Years 1-9 Present value of annuity 0 Investment Net Cash Inflow Annuity PV Factor (1=10%, n=9) Present Value Altro Der 1-9 Present value of annuity 0 Investment Net present value of Project B Requirement 2. What is the maximum acceptable price to pay for each project? Maximum Acceptable Price Project A Project B Requirement 3. What is the profitability index of each project? (Round to two decimal places, X.XX.) Select the formula, then enter the amounts to calculate the profitability index of each project. Profitability Index Project A Project B Question Help Swan Industries is deciding whether to automate one phase of its production process. The manufacturing equipment has a six-year life and will cost $930,000. Projected net cash inflows are as follows: (Click the icon to view the projected net cash inflows.) (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of S1 table.) Read the requirements. Requirement 1. Compute this project's NPV using Swan's 16% hurdle rate. Should Swan invest in the equipment? Use the following table to calculate the net present value of the project. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Net Cash PV Factor Present Value Years Inflow (i = 16%) i Data Table 1 2 Year 1 S 3 Present value of each year's inflow. (n = 1) (n=2) (n = 3) (n = 4) (n = 5) (n=6) Year 2 Year 3 263,000 250,000 225,000 4 5 Year 4 210,000 205,000 6 Year 5 Total PV of cash inflows Year 6 175,000 0 Initial investment Net present value of the project Print Done | Enter any number in the edit fields and then continue to the next question. ? 0 Initial investment Net present value of the project Swan Industries invest in the equipment. Requirement 2. Swan could refurbish the equipment at the end of six years for $106,000. The refurbished equipment could be used one more year, providing $75,000 of net cash inflows in year 7. Additionally, the refurbished equipment would have a $53,000 residual value at the end of year 7. Should Swan invest in the equipment and refurbish it after six years? (Hint: In addition to your answer to Requirement 1, discount the additional cash outflow and inflows back to the present value.) Calculate the NPV of the refurbishment. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for cash outflows and for a negative net present value.) Cash PV Factor Present (outflow)/inflow (i = 16%) Value Refurbishment at the end of Year 6 (n = 6) Cash inflows in Year 7 (n = 7) Residual value (n = 7) Net present value of the refurbishment NPV. The refurbishment NPV is to overcome the original NPV of the equipment. Therefore, the refurbishment alter Swan Industries' original decision regarding the The refurbishment provides a equipment investment. Reference Present Value of $1 Periods 1 2 1% 0.990 0.980 0.971 0.961 0.951 2% 0.980 0.961 0.942 0.924 0.906 3% 0.971 0.943 0.915 0.888 0.863 4% 0.962 0.925 0.889 0.855 0.822 5% 0.952 0.907 0.864 0.823 0.784 6% 0.943 0.890 0.840 0.792 0.747 7% 0.935 0.873 0.816 8% 0.926 0.857 0.794 0.735 0.681 9% 0.917 0.842 0.772 0.708 0.650 10% 0.909 0.826 0.751 0.683 0.621 12% 0.893 0.797 0.712 0.636 0.567 14% 0.877 0.769 0.675 0.592 0.519 15% 0.870 0.756 0.658 16% 0.862 0.743 0.641 0.552 0.476 18% 0.847 0.718 0.609 0.516 0.437 20% 0.833 0.694 0.579 0.482 0.402 3 0.763 0.572 4 5 0.713 0.497 0.564 0.456 6 7 8 9 10 0.942 0.933 0.923 0.914 0.905 0.888 0.871 0.853 0.837 0.820 0.837 0.813 0.789 0.766 0.744 0.790 0.760 0.731 0.703 0.676 0.746 0.711 0.677 0.645 0.614 0.705 0.665 0.627 0.592 0.558 0.666 0.623 0.582 0.544 0.508 0.630 0.583 0.540 0.500 0.463 0.596 0.547 0.502 0.460 0.422 0.513 0.467 0.424 0.386 0.507 0.452 0.404 0.361 0.322 0.400 0.351 0.308 0.270 0.432 0.376 0.327 0.284 0.247 0.410 0.354 0.305 0.263 0.227 0.370 0.314 0.266 0.225 0.191 0.335 0.279 0.233 0.194 0.162 11 12 13 14 15 0.896 0.887 0.879 0.870 0.861 0.804 0.788 0.773 0.758 0.743 0.650 0.625 0.601 0.577 0.585 0.557 0.530 0.505 0.481 0.458 0.436 0.527 0.497 0.469 0.442 0.417 0.475 0.444 0.415 0.388 0.429 0.397 0.368 0.340 0.315 0.388 0.356 0.326 0.299 0.275 0.350 0.319 0.290 0.263 0.239 0.287 0.257 0.229 0.205 0.183 0.237 0.208 0.182 0.160 0.215 0.187 0.163 0.141 0.123 0.195 0.168 0.145 0.125 0.108 0.162 0.137 0.116 0.099 0.084 0.135 0.112 0.093 0.078 0.065 0.555 0.362 0.722 0.701 0.681 0.661 0.642 0.623 0.605 0.587 0.570 0.554 0.140 0.728 0.339 0.317 0.714 16 17 18 19 20 0.853 0.844 0.836 0.828 0.820 0.700 0.534 0.513 0.494 0.475 0.456 0.416 0.394 0.371 0.350 0.331 0.312 0.296 0.292 0.270 0.250 0.232 0.215 0.252 0.231 0.212 0.194 0.178 0.218 0.198 0.180 0.164 0.149 0.163 0.146 0.130 0.116 0.104 0.123 0.108 0.095 0.083 0.073 0.107 0.093 0.081 0.070 0.061 0.093 0.080 0.069 0.060 0.051 0.071 0.060 0.051 0.043 0.037 0.054 0.045 0.038 0.031 0.026 0.686 0.673 0.396 0.377 0.277 0.258 21 22 23 0.811 0.803 0.795 0.660 0.647 0.634 0.538 0.522 0.507 0.439 0.422 0.406 0.359 0.342 0.326 0.294 0.278 0.262 0.242 0.226 0.211 0.199 0.184 0.170 0.164 0.150 0.138 0.135 0.123 0.112 0.093 0.083 0.074 0.064 0.056 0.049 0.053 0.046 0.040 0.044 0.038 0.033 0.031 0.026 0.022 0.022 0.018 0.015 Print Done Reference 1 12% 0.893 1.690 2.402 3.037 3.605 14% 0.877 1.647 2.322 2.914 3.433 15% 0.870 1.626 2.283 2.855 3.352 16% 0.862 1.605 2.246 2.798 18% 0.847 1.566 2.174 2.690 3.127 20% 0.833 1.528 2.106 2.589 3.791 3.274 2.991 4.111 4.564 4.968 5.328 5.650 3.889 4.288 4.639 4.946 5.216 3.784 4.160 4.487 4.772 5.019 3.685 4.039 4.344 4.607 4.833 3.326 3.605 3.837 4.031 4.192 6.515 Present Value of Ordinary Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 2 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736 3 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487 4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 5 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 8 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335 9 8.566 8.162 7.786 7.435 7.108 6.802 6.247 5.995 5.759 10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145 11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 12 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.814 13 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103 14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367 15 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.061 7.606 16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.313 7.824 17 15.562 14.292 13.166 12.166 | 11.274 10.477 9.763 9.122 8.544 8.022 18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201 19 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 20 18.046 16.351 14.877 13.590 12.462 11.470 10.5949.818 9.129 8.514 21 18.857 17.011 15.415 14.029 12.821 11.764 10.836 10.017 9.292 8.649 22 19.660 17.658 15.937 14.451 13.163 12.042 11.061 10.201 9.442 8.772 23 20.456 18.292 16.444 14.857 13.489 12.303 11.272 10.371 9.580 8.883 3.498 3.812 4.078 4.303 4.494 4.656 4.793 4.910 5.008 5.092 5.938 6.194 6.424 6.628 6.811 5.453 5.660 5.842 6.002 6.142 5.234 5.421 5.583 5.724 5.847 5.029 5.197 5.342 5.468 5.575 4.327 4.439 4.533 4.611 4.675 8.851 4.730 6.974 7.120 7.250 7.366 7.469 6.265 6.373 6.467 6.550 6.623 5.954 6.047 6.128 6.198 6.259 5.669 5.749 5.818 5.877 5.929 5.162 5.222 5.273 5.316 5.353 4.775 4.812 4.844 4.870 7.562 7.645 7.718 6.687 6.743 6.792 6.312 6.359 6.399 5.973 6.011 6.044 5.384 5.410 5.432 4.891 4.909 4.925 Print Done