Question
x P10-10 (similar to) Question Help NPVMutually exclusive projectsHook Industries is considering the replacement of one of its old metal stamping machines. Three alternative replacement
x
| P10-10 (similar to) | Question Help
|
NPVMutually
exclusive projectsHook Industries is considering the replacement of one of its old metal stamping machines. Three alternative replacement machines are under consideration. The relevant cash flows associated with each are shown in the following table:
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. The firm's cost of capital is
8%.
a.Calculate the net present value
(NPV)
of each press.
b.Using NPV, evaluate the acceptability of each press.
c.Rank the presses from best to worst using NPV.
d.Calculate the profitability index (PI) for each press.
e.Rank the presses from best to worst using PI.
a. The NPV of press A is $nothing.(Round to the nearest cent.)
DATA TABLE:
(Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.)
| Machine A | Machine B | Machine C |
| |
| Initial investment (CF0) | $84,600 | $60,400 | $130,000 | |
| Year (t) | Cash inflows (CFt) | |||
| 1 | $17,500 | $12,000 | $49,600 | |
| 2 | $17,500 | $13,500 | $29,700 | |
| 3 | $17,500 | $16,100 | $19,600 | |
| 4 | $17,500 | $17,600 | $20,500 | |
| 5 | $17,500 | $19,500 | $20,300 | |
| 6 | $17,500 | $24,800 | $29,500 | |
| 7 | $17,500 | $40,100 | ||
| 8 | $17,500 | $49,900 | ||
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Modern Advanced Accounting In Canada
Authors: Hilton Murray, Herauf Darrell
7th Edition
1259066487, 978-1259066481
