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

$1\%1(1)/(2)\%5\%6\%8\%10\%12\%15\%20\%$

$10\mathrm{.}9900\mathrm{.}9850\mathrm{.}9520\mathrm{.}9430\mathrm{.}9260\mathrm{.}9090\mathrm{.}8930\mathrm{.}8700\mathrm{.}833$

$20\mathrm{.}9800\mathrm{.}9710\mathrm{.}9070\mathrm{.}8900\mathrm{.}8570\mathrm{.}8260\mathrm{.}7970\mathrm{.}7560\mathrm{.}694$

$30\mathrm{.}9710\mathrm{.}9560\mathrm{.}8640\mathrm{.}8400\mathrm{.}7940\mathrm{.}7510\mathrm{.}7120\mathrm{.}6580\mathrm{.}579$

$40\mathrm{.}9610\mathrm{.}9420\mathrm{.}8230\mathrm{.}7920\mathrm{.}7350\mathrm{.}6830\mathrm{.}6360\mathrm{.}5720\mathrm{.}482$

$50\mathrm{.}9510\mathrm{.}9280\mathrm{.}7840\mathrm{.}7470\mathrm{.}6810\mathrm{.}6210\mathrm{.}5670\mathrm{.}4970\mathrm{.}402$

$60\mathrm{.}9420\mathrm{.}9150\mathrm{.}7460\mathrm{.}7050\mathrm{.}6300\mathrm{.}5640\mathrm{.}5070\mathrm{.}4320\mathrm{.}335$

$70\mathrm{.}9330\mathrm{.}9010\mathrm{.}7110\mathrm{.}6650\mathrm{.}5830\mathrm{.}5130\mathrm{.}4520\mathrm{.}3760\mathrm{.}279$

$80\mathrm{.}9230\mathrm{.}8880\mathrm{.}6770\mathrm{.}6270\mathrm{.}5400\mathrm{.}4670\mathrm{.}4040\mathrm{.}3270\mathrm{.}233$

$90\mathrm{.}9140\mathrm{.}8750\mathrm{.}6450\mathrm{.}5920\mathrm{.}5000\mathrm{.}4240\mathrm{.}3610\mathrm{.}2840\mathrm{.}194$

$100\mathrm{.}9050\mathrm{.}8620\mathrm{.}6140\mathrm{.}5580\mathrm{.}4630\mathrm{.}3860\mathrm{.}3220\mathrm{.}2470\mathrm{.}162$

$200\mathrm{.}8200\mathrm{.}7420\mathrm{.}3770\mathrm{.}3120\mathrm{.}2150\mathrm{.}1490\mathrm{.}1040\mathrm{.}0610\mathrm{.}026$

$240\mathrm{.}7880\mathrm{.}7000\mathrm{.}3100\mathrm{.}2470\mathrm{.}1580\mathrm{.}1020\mathrm{.}0660\mathrm{.}0350\mathrm{.}013$

$360\mathrm{.}6990\mathrm{.}5850\mathrm{.}1730\mathrm{.}1230\mathrm{.}0630\mathrm{.}0320\mathrm{.}0170\mathrm{.}0070\mathrm{.}001$

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

$1\%1(1)/(2)\%5\%6\%8\%10\%12\%15\%20\%$

$10\mathrm{.}9900\mathrm{.}9850\mathrm{.}9520\mathrm{.}9430\mathrm{.}9260\mathrm{.}9090\mathrm{.}8930\mathrm{.}8700\mathrm{.}833$

$21\mathrm{.}9701\mathrm{.}9561\mathrm{.}8591\mathrm{.}8331\mathrm{.}7831\mathrm{.}7361\mathrm{.}6901\mathrm{.}6261\mathrm{.}528$

$32\mathrm{.}9412\mathrm{.}9122\mathrm{.}7232\mathrm{.}6732\mathrm{.}5772\mathrm{.}4872\mathrm{.}4022\mathrm{.}2832\mathrm{.}106$

$43\mathrm{.}9023\mathrm{.}8543\mathrm{.}5463\mathrm{.}4653\mathrm{.}3123\mathrm{.}1703\mathrm{.}0372\mathrm{.}8552\mathrm{.}589$

$54\mathrm{.}8534\mathrm{.}7834\mathrm{.}3294\mathrm{.}2123\mathrm{.}9933\mathrm{.}7913\mathrm{.}6053\mathrm{.}3522\mathrm{.}991$

$65\mathrm{.}7955\mathrm{.}6975\mathrm{.}0764\mathrm{.}9174\mathrm{.}6234\mathrm{.}3554\mathrm{.}1113\mathrm{.}7843\mathrm{.}326$

$76\mathrm{.}7286\mathrm{.}5985\mathrm{.}7865\mathrm{.}5825\mathrm{.}2064\mathrm{.}8684\mathrm{.}5644\mathrm{.}1603\mathrm{.}605$

$87\mathrm{.}6527\mathrm{.}4866\mathrm{.}4636\mathrm{.}2105\mathrm{.}7475\mathrm{.}3354\mathrm{.}9684\mathrm{.}4873\mathrm{.}837$

$98\mathrm{.}5668\mathrm{.}3617\mathrm{.}1086\mathrm{.}8026\mathrm{.}2475\mathrm{.}7595\mathrm{.}3284\mathrm{.}7724\mathrm{.}031$

$109\mathrm{.}4719\mathrm{.}2227\mathrm{.}7227\mathrm{.}3606\mathrm{.}7106\mathrm{.}1455\mathrm{.}6505\mathrm{.}0194\mathrm{.}192$

$2018\mathrm{.}04617\mathrm{.}16912\mathrm{.}46211\mathrm{.}4709\mathrm{.}8188\mathrm{.}5147\mathrm{.}4696\mathrm{.}2594\mathrm{.}870$

$2421\mathrm{.}24320\mathrm{.}03013\mathrm{.}79912\mathrm{.}55010\mathrm{.}5298\mathrm{.}9857\mathrm{.}7846\mathrm{.}4344\mathrm{.}937$

$3630\mathrm{.}10827\mathrm{.}66116\mathrm{.}54714\mathrm{.}62111\mathrm{.}7179\mathrm{.}6778\mathrm{.}1926\mathrm{.}6234\mathrm{.}993$