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Willie Industries is evaluating two alternative investment opportunities. The controller of the company has prepared the following analysis of the two investment proposals. Items in

Willie Industries is evaluating two alternative investment opportunities. The controller of the company has prepared the following analysis of the two investment proposals. Items in addition to depreciation may have attributed to differences in the estimated annual cash flow and net income figures shown below: Proposal A Proposal B
Required investment in equipment $ 625,000 $ 720,000
Estimated service life of equipment 5 years 6 years
Estimated salvage value $ 100,000 $ 0
Estimated annual net cash flow 156,250240,000
Estimated increase in annual net income 58,00064,800 Required:
For each proposed investment, compute the following. Assume discounted at an annual rate of 10 percent. Use Exhibits 26-3 and 26-4 where necessary.
What is the (3) Net present value?
EXHIBIT 263 Present Value of $1 Payable in n Periods
Present Value of $1 Due in n Periods*
Number of Periods (n) Discount Rate
1%1(1)/(2)%5%6%8%10%12%15%20%
10.9900.9850.9520.9430.9260.9090.8930.8700.833
20.9800.9710.9070.8900.8570.8260.7970.7560.694
30.9710.9560.8640.8400.7940.7510.7120.6580.579
40.9610.9420.8230.7920.7350.6830.6360.5720.482
50.9510.9280.7840.7470.6810.6210.5670.4970.402
60.9420.9150.7460.7050.6300.5640.5070.4320.335
70.9330.9010.7110.6650.5830.5130.4520.3760.279
80.9230.8880.6770.6270.5400.4670.4040.3270.233
90.9140.8750.6450.5920.5000.4240.3610.2840.194
100.9050.8620.6140.5580.4630.3860.3220.2470.162
200.8200.7420.3770.3120.2150.1490.1040.0610.026
240.7880.7000.3100.2470.1580.1020.0660.0350.013
360.6990.5850.1730.1230.0630.0320.0170.0070.001
EXHIBIT 264 Present Value of a $1 Annuity Receivable Each Period for n Periods
Present Value of $1 to Be Received Periodically for n Periods
Number of Periods (n) Discount Rate
1%1(1)/(2)%5%6%8%10%12%15%20%
10.9900.9850.9520.9430.9260.9090.8930.8700.833
21.9701.9561.8591.8331.7831.7361.6901.6261.528
32.9412.9122.7232.6732.5772.4872.4022.2832.106
43.9023.8543.5463.4653.3123.1703.0372.8552.589
54.8534.7834.3294.2123.9933.7913.6053.3522.991
65.7955.6975.0764.9174.6234.3554.1113.7843.326
76.7286.5985.7865.5825.2064.8684.5644.1603.605
87.6527.4866.4636.2105.7475.3354.9684.4873.837
98.5668.3617.1086.8026.2475.7595.3284.7724.031
109.4719.2227.7227.3606.7106.1455.6505.0194.192
2018.04617.16912.46211.4709.8188.5147.4696.2594.870
2421.24320.03013.79912.55010.5298.9857.7846.4344.937
3630.10827.66116.54714.62111.7179.6778.1926.6234.993

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