X - X Data table More info Year The company is considering two options. Option 1 is to refurbish the current machine at a cost of $2,400,000. If refurbished, Colston expects the machine to last another eight years and then have no residual value. Option 2 is to replace the machine at a cost of $4,200,000. A new machine would last 10 years and have no residual value. Year 1 Year 2 Purchase New Machine 3,120,000 820,000 620,000 Refurbish Current Machine S 1,320,000 $ 720,000 520,000 320,000 120,000 120,000 120,000 Year 3 Year 4 Year 5 Print Done 420,000 220,000 220,000 220,000 220,000 Year 6 6 Year 7 7 Year 8 0 120,000 Year 9 220,000 220,000 Year 10 $ 3,360,000 $ 6,300,000 Total Print Done 14% Present Value of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 15% 16% 18% 20% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.9090.893 0.877 0.870 0.862 0.847 0.833 Period 2 0.980 0.961 0.943 0.925 0.9070.890 0.873 0.857 0.842 0.826 0.797 0.769 0.756 0.743 0.7180.694 Period 3 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.712 0.675 0.658 0.641 0.609 0.579 Period 4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.636 0.592 0.572 0.5520.516 0.482 Period 5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.567 0.519 0.497 0.476 0.437 0.402 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.6660.630 0.596 0.564 0.507 0.456 0.432 0.410 0.370 0.335 Period 7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.452 0.400 0.376 0.354 0.3140.279 Period 8 0.923 0.853 0.789 0.731 0.677 0.627 0.5820.540 0.502 0.467 0.404 0.351 0.327 0.305 0.266 0.233 Period 9 0.914 0.837 0.766 0.703 0.6450.5920.5440.500 0.460 0.424 0.361 0.308 0.284 0.263 0.225 0.194 Period 10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.322 0.270 0.247 0.227 0.191 0.162 Period 11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.287 0.237 0.215 0.195 0.162 0.135 Period 12 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.257 0.208 0.187 0.168 0.1370.112 Period 13 0.879 0.773 0.681 0.601 0.530 0.4690.415 0.368 0.326 0.290 0.229 0.182 0.163 0.145 0.116 0.093 Period 14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.205 0.160 0.141 0.125 0.099 0.078 Period 15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.183 0.140 0.123 0.108 0.084 0.065 Period 16 0.853 0.728 0.623 0.534 0.458 0.394 0.3390.292 0.252 0.218 0.163 0.123 0.107 0.093 0.071 0.054 Period 17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.146 0.108 0.093 0.080 0.060 0.045 Period 18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.130 0.095 0.081 0.069 0.051 0.038 Period 19 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.116 0.083 0.070 0.060 0.043 0.031 Period 20 0.820 0.673 0.554 0.456 0.377 0.3120.258 0.215 0.178 0.149 0.104 0.073 0.061 0.051 0.037 0.026 Period 21 0.811 0.660 0.538 0.439 0.359 0.2940.242 0.199 0.1640.135 0.093 0.064 0.053 0.044 0.031 0.022 Period 22 0.803 0.647 0.522 0.422 0.342 0.278 0.226 0.184 0.150 0.123 0.083 0.056 0.046 0.038 0.026 0.018 Period 23 0.795 0.634 0.507 0.406 0.326 0.262 0211 0.170 0.138 0.112 0.074 0.049 0.040 0.033 0.022 0.015 Period 24 0.788 0.622 0.492 0.390 0.310 0.247 0.197 0.158 0.126 0.102 0.066 0.043 0.035 0.028 0.019 0.013 Period 25 0.780 0.610 0.478 0.375 0.295 0.233 0.184 0.146 0.116 0.092 0.059 0.038 0.030 0.024 0.0160.010 Period 26 0.772 0.598 0.464 0.361 0281 0.220 0.172 0.135 0.106 0.084 0.053 0.033 0.026 0.021 0.014 0.009 Period 27 0.764 0.586 0.450 0.347 0.268 0.207 0.161 0.125 0.098 0.076 0.047 0.029 0.023 0.018 0.0110.007 Period 28 0.757 0.574 0.437 0.333 0.255 0.1960.150 0.116 0.090 0.069 0.042 0.026 0.0200.016 0.010 0.006 Period 29 0.749 0.563 0.424 0.321 0243 0.185 0.141 0.107 0.082 0.063 0.037 0.022 0.017 | 0.014 0.008 0.005 Period 30 0.742 0.552 0.412 0.308 0.231 0.1740.131 0.099 0.075 0.057 0.033 0.020 0.015 0.012 0.007 0.004 Period 40 0.672 0.453 0.307 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.011 0.005 0.0040.003 0.001 0.001 Period 50 0.608 0.372 0.228 0.141 0.087 0.054 0.034 0.021 0.013 0.0090.003 0.001 0.001 0.001 Present Value of Ordinary Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% 16% 18% 20% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0.847 0.833 Period 2 1.970 1.942 1.9131.886 1.859 1833 1.808 1.783 1.759 1.736 1.6901.647 1.626 1.6051.566 1.528 Period 3 2.9412.884 2.829 2.775 2.723 2.673 2624 2577 2531 2.487 2.402 2.322 2.283 2.246 2.174 2. 106 Period 4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.3123 240 3.170 3.037 2.914 2.855 2.798 2.690 2.589 Period 5 4.853 4713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.605 3.433 3.352 3.274 3.127 2.991 Period 6 5.795 5.601 5.417 5242 5.076 4.917 4.767 4.623 4.486 4.355 4.111 3.8893.784 3.685 3.498 3.326 Period 7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5206 5.033 4.868 4.564 4.288 4.160 4.0393.812 3.605 Period 8 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5535 5.335 4.968 4.639 4.487 4344 4.078 3.837 Period 9 8.566 8. 162 7.786 7.435 7.108 6.802 6.515 6 247 5.995 5.759 5.328 4.946 4772 4.607 4303 4.031 Period 10 9.471 8.983 8.530 8.1117.722 7.360 7.0246.710 6.418 6.145 5.650 5.216 5.019 4.833 4.494 4.192 Period 11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 5.938 5.453 5.234 5.029 4.656 4.327 Period 12 11.255 10.575 9.9549.385 8.863 8.384 7.9437.536 7.161 | 6.814 6.194 5.660 5.421 5.1974.793 4.439 Period 13 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.424 5.8425.583 5.342 4.910 4533 Period 14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 82447.786 7.367 6.628 6.002 5.724 5.468 5.008 4.611 Period 15 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.5598.061 7.606 6.811 6.142 5.847 5.575 5.092 4.675 Period 16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824 6.974 6.265 5.954 5.669 5.162 4.730 Period 17 15.562 14.292 | 13.166 12.166 11.274 10.477 9.763 9.1228544 8.022 7.120 6.373 6.047 5.749 5.222 4.775 Period 18 16.398 14.992 13.754 12.659 11.690 10.828| 10.05993728.756 8.2017.250 6.4676.128 5.818 5.2734.812 Period 19 17.226 15.678 14 324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 | 7.366 6.550 6.1985.877 5.316 4.844 Period 20 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9818 9.129 8.5147.469 6.623 6.259 5.929 5.353 4.870 Period 21 18.857 17.011 15.415 14.029 12.821 11.764 10.836 10.0179292 8.649 | 7.562 6.687 6.3125.973 5.384 4.891 Period 22 19.660 17.658 15.937 14.451 13.163 12.042 11.061 10.2019.442 8.772 7.645 6.7436.3596.0115.410 4.909 Period 23 20.45618.292 16.444 14.857 13.489 12.303 11.272 10.371 9.5808.883 7.718 6.792 6.3996.044 5.432 4.925 Period 24 21.243 18.914 16.936 15.247 13.799 12.550 11.469 10.529 9.7078.9857.784 6.835 6.4346.073 5.451 4.937 Period 25 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 9.8239.077 7.843 6.8736.464 6.097 5.467 4948 Period 26 22.795 20.121 17.877 15.983 14.375 13.003) 11.826 10.8109.929 9.161 7.896 6.906 6.491 6.118 5.480 4.956 Period 27 23.560 20.707 18.327 16.330 14.643 13.211 11.987 10.935 10.027 9.237 7.943 6.935 6.514 6.136 5.492 4.964 Period 28 24.316 21.281 18.764 16.663 14.898 13.406 12.137 11.051 10.116 9.307 7.984 6.961 6.534 6.152 5.502 4.970 Period 29 25.066 21.844 19.188 16.984 15.141 13.591 12 278 11.158 10.1989.370 8.022 6.983 6.551 6.166 5.510 4.975 Period 30 25.80822.396 19.600 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.055 7.003 6.566 6.177 5.517 4.979 Period 40 32.835 27.355 23.115 19.793 17.159 15.046 13.332 11.925 10.757 9.7798.244 7.105 6.642 6.233 5.548 4.997 Period 50 39.196 31.424 25.730 21.482 18256 15.762 13.801 12233 10.962 9.915 8.304 7.133 6.661 6246 5.554 4.999 Future Value of $1 Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 Period 11 Period 12 Period 13 Period 14 Period 15 Period 16 Period 17 Period 18 Period 19 Period 20 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% 1.010 1.020 1.030 1.040 1.050 1.000 1.070 1.080 1.090 1.100 1.120 1.140 1.150 1.020 1.040 1.061 1.0821.103 1.1241.145 | 1.166 1.1881.210 1.254 1.300 1.323 1.030 1.061 1.093 1.125 1.158 1.191 1 225 1.260 1.295 1.331 1.405 1.482 1.521 1.041 1.0821.126 1.170 1.216 1.2621.311 1.360 1.4121.464 1.574 1.689 1.749 1.051 1.104 1.159 1.217 1.276 1.338 1.403 1.469 1.539 1.611 1.762 1.925 2011 1.062 1.126 1.194 1.265 1.340 1.419 1.501 1.587 1.677 1.772 1.974 2.1952 313 1.072 1.149 1.230 1.316 1.407 1.5041.606 1.714 1.828 1.949 2.211 2 502 2.660 1.083 1.1721.267 1.369 1.4771.594 1.718 1.851 1.993 2.144 2.476 2.853 3.059 1.094 1.195 1.305 1.423 1.551 1.689 1.838 1.999 2.172 2358 27733.252 3.518 1.105 1.219 1.344 1.480 1.629 1.791 1.967 2.159 2.367 2 594 3.106 3.707 4.046 1.116 1.243 1.384 1539 1.710 1.898 2.105 2332 2.580 2.853 3.479 4.226 4.652 1.1271.268 1.426 1.601 1.796 2.012 2.252 2518 2.813 3.138 3.896 4.818 5.350 1.138 1.294 1.469 1665 1886 2.133 2.410 2720 3.066 3.452 4.363 5.492 6.153 1.149 1.319 1.513 1.732 1.980 2.261 2.579 2.937 3.342 3.798 4.887 6.2617.076 1.161 1.346 1.558 1.801 2.079 2.3972.759 3.172 3.642 4.177 5.474 7.1388.137 1.173 1.373 1.605 1.873 2.183 2.540 2.952 3.426 3.970 4.595 6.130 8.137 9.358 1.184 1.400 1.653 1.948 2.292 2.693 3.159 3.700 4.328 5.0546.8669 276 10.76 1.196 1.428 1.7022026 2407 2.854 3.380 3.996 4.717 55607.690 10.58 12.38 1.208 1.457 1.754 2.107 2.527 3.026 3.617 4.316 5.142 6.116 8.613 12.06 14.23 1.220 1.486 1.806 2.191 2.653 3.2073.870 4.661 5.604 6.727 9.646 13.74 16:37 1.232 1.516 1.860 2.279 2.786 3.400 4.141 5.034 6.1097.400 10.80 15.67 18.82 1.245 1.546 1.916 2.370 2.925 3.604 4.430 5.437 6.659 8 140 12.10 17.86 21.64 1.257 1.577 1.9742465 3.072 3.820 4.741 5.871 7.258 8.954 13.55 20.36 24.89 1.270 1.608 2.0332563 3.225 4.049 5.0726341 7.911 9.850 15.18 23.212863 1.282 1.641 2.094 2.666 3.386 4.2925.427 6.848 8.623 10.83 17.00 26.46 32.92 1.295 1.673 2.157 2.772 3.556 4.549 5.8077.396 9.399 11.92 19.04 30.1737.86 1.308 1.707 2 221 2.883 3.733 4.822 6.214 7.988 10.25 13.11 21.32 34 39 43.54 1.321 1.741 2.288 2.999 3.920 5.112 6.649 8.627 11.17 14.42 23.88 39.20 50.07 1.335 1.776 2.357 3.119 4.116 5.418 7.1149.317 12.17 15.86 26.75 44.69 57 58 1.348 1811 2.427 3.243 4322 5.743 7.612 10.06 13.27 17.45 29.96 50.95 66.21 1.489 2.208 3.262 4.801 7.040 1029 14.97 21.72 31.41 45.26 93.05 188.9267.9 1.645 2.692 4.384 7.107 | 11.47 18.42 29.46 46.90 74.36 1174 289.0 700 2 1,084 Period 21 Period 22 Period 23 Period 24 Period 25 Period 26 Period 27 Period 28 Period 29 Period 30 Period 40 Period 50 Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 Period 11 Period 12 Period 13 Period 14 Period 15 Period 16 Period 17 Period 18 Period 19 Period 20 Future Value of Ordinary Annuity of $1 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2010 2.020 2030 2040 2050 2.060 2.070 2.080 2.090 2.100 2.120 2.140 2.150 3.030 3.060 3.091 3.122 3.153 3.1843.215 3 246 3.278 3.310 3.374 3.440 3.473 4.060 4.122 4.184 4.246 | 43104375 4.440 4.506 4.573 4.641 4.779 4.921 4.993 5.101 5.204 5.309 5.416 5.526 5.637 5.7515.867 5.985 6.105 6.353 6.610 6.742 6.152 6.308 6.468 6.633 6.802 6.975 | 7.153 7.336 | 7.523 7.716 8.115 8.536 8.754 7 214 7.4347.6627.898 8.142 8.394 8.654 89239.2009.487 10.09 10.73 11.07 8.286 8.5838.89292149.549 9.897 10.260 10.64 11.03 | 11.44 12.30 13.23 13.73 9.369 9.755 10.16 10.58 | 11.03 11.49 11.98 12.49 13.02 13.58 14.78 16.09 16.79 10.46 10.95 11.46 12.01 12.58 13.18 13.82 14.49 15.1915.94 17.55 19.34 20.30 11.57 12.17 12.81 13.49 14.21 14.97 15.78 16.65 1756 18.53 20.65 23.04 24.35 12.68 13.41 14.19 15.03 15.92 16.87 17.89 18.98 20.142138 24.13 27.27 29.00 13.81 14.68 15.62 16.63 17.71 18.88 20.14 21.50 22.95 24.52 28.03 32.09 34 35 14.95 15.97 17.09 | 18.29 19.60 21.02 22.55 24.21 26.02 27.98 32.39 37.58 40.50 16.10 17.29 18.60 20.02 21.58 23.28 25.13 27.15 29.36 31.77 37.28 43.84 47.58 17.26 18.64 20.16 21.82 23.66 25.67 27.89 30.32 33.00 35.95 42.75 50.98 55.72 18.43 20.01 21.76 23.70 25.84 28.21 30.84 33.75 36.97 40.54 48.88 59.12 65.08 19.61 21.41 23.41 25.65 28.13 30.91 34.00 37.45 41.30 45.60 55.75 68.39 75.84 20.81 22.84 25.12 27.67 30.54 33.76 37 38 41.45 46.02 51.16 63.44 78.97 88.21 22.02 24.30 26.87 29.78 33.07 36.79 41.00 45.76 51.16 5728 72.05 91.02 1024 23 24 25.7828.68 31.97 35.72 39.99 44.87 50.42 56.76 64.00 81.70 104.8 118.8 24.47 27 30 30.54 3425 38.51 43.39 49.01 55.46 62.87 71.40 92.50 120.4 137.6 25.72 28.85 32.45 36.62 41.43 47.00 53.44 60.89 69.53 79.54 1046 138.3 159.3 26.97 30.42 34.43 39.08 44.50 50.82 58.18 66.76 76.7988.50 1182158.7 1842 28.24 32.03 36.46 | 41.65 47.73 54.86 63.25 73.11 84.70 98.35 133.3 181.9212.8 29.53 33.67 38.55 443151.11 59.16 68.68 79.95 | 93.32 1092 150.3 2083 245.7 30.82 35.34 40.71 47.08 54.67 | 63.71 | 74.48 87.35 102.7 121.1 169.4 238.5 283.6 32.13 37.05 | 42.93 49.97 58.40 68.53 80.70 95.34 113.0 134 2190.7 2729 327.1 33.45 38.79 45.22 52.97 6232 73.64 87.35 104.0 1241 148.6 2146 3121 377.2 34.78 40.57 47.58 56.08 66.44 79.06 94.46 113.3 1363 1645 2413 356.8 4347 48.89 60.40 75.40 95.03 | 120.81548 199.6 259.1 337.9442.6 767.1 1,342 1,779 64.46 84.58 112.8 152.7 209.3 290.3 406.5 573.8 815.1 1,164 2,400 4,995 7,218 Period 21 Period 22 Period 23 Period 24 Period 25 Period 26 Period 27 Period 28 Period 29 Period 30 Period 40 Period 50 1 Requirement 1. Compute the payback, the ARR, the NPV, and the profitability index of these two options. Compute the payback for both options. Begin by completing the payback schedule for Option 1 (refurbish). Net Cash Outflows Net Cash Inflows Year Amount Invested Annual Accumulated 0 $ 2,400,000 1,320,000 1,320,000 2 720,000 2,040,000 520,000 2,560,000 320,000 2,880,000 5 120,000 3,000,000 120,000 3,120,000 7 120,000 3,240,000 120,000 3,360,000 3 4 6 7 8 (Round your answer to one decimal place.) The payback for Option 1 (refurbish current machine) is 2.7 years. N Now complete the payback schedule for Option 2 (purchase). Net Cash Outflows Net Cash Inflows Year Amount Invested Annual Accumulated 0 $ 4,200,000 1 3,120,000 3,120,000 820,000 3,940,000 620,000 4,560,000 4 420,000 4,980,000 5 220,000 5,200,000 6 220,000 5,420,000 7 220,000 5,640,000 220,000 5,860,000 9 220,000 6,080,000 10 220,000 6,300,000 00 9 (Round your answer to one decimal place.) The payback for Option 2 (purchase new machine) is years. Compute the ARR (accounting rate of return) for each of the options. Average amount invested = ARR Refurbish % Purchase II % Compute the NPV for each of the options. Begin with Option 1 (refurbish). (Enter the factors to three decimal places. X.XXX. Use parentheses or a minus sign for a negative net present value.) Net Cash PV Factor Present Years Inflow (i = 16%) Value Present value of each year's inflow: (n = 1) 1 2 (n = 2) (n = 3) 3 4 5 (n = 4) (n = 5) (n = 6) (n = 7) 6 7 8 (n = 8) Total PV of cash inflows 0 Initial investment Net present value of the project Now compute the NPV for Option 2 (purchase). (Enter the factors to three decimal places. X.XXX. Use parentheses or a minus sign for a negative net present value.) Net Cash PV Factor Present Years Inflow (i = 16%) Value 1 2 N 3 4 5 6 Present value of each year's inflow: (n = 1) (n=2) (n = 3) (n = 4) (n = 5) (n = 6) (n = 7) (n = 8) (n = 9) (n = 10) Total PV of cash inflows Initial investment 7 8 9 III 10 0 Net present value of the project Finally, compute the profitability index for each option. (Round to two decimal places X.XX.) Profitability index Refurbish 11 Purchase 11 Requirement 2. Which option should Colston choose? Why? Review your answers in Requirement 1. Colston should choose because this option has a payback period, an ARR that is the other option, a NPV, and its profitability index is