Consider each of the following independent cases. The present value tables provi

Question

Consider each of the following independent cases. The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Hal's Stunt Company is investing $120,000 in a project that will yield a uniform series of cash inflows over the next four years. If the internal rate of return is 14 percent, how much cash inflow per year can be expected? Round your answer to the nearest dollar. Warner Medical Clinic has decided to invest in some new blood diagnostic equipment. The equipment will have a three-year life and will produce a uniform series of cash savings. The net present value of the equipment is $1,750, using a discount rate of 8 percent. The internal rate of return is 12 percent. Determine the investment and the amount of cash savings realized each year. A new lathe costing $60,096 will produce savings of $12,000 per year. How many years must he lathe last if an IRR of 18 percent is realized? The NPV of a new product (a new brand of candy) is $6,075. The product has a life of four years and produces the following cash flows: The cost of the project is three times the cash flow produced in Year 4. The discount rate is 10 percent. Find the cost of the project and the cash flow for Year 4. When required, round your answers to the nearest dollar.

Explanation / Answer

1) Investment       120,000 internal rate of return              0.14 Cash inflow per year          16,800 2) NPV            1,750 Discount rate of 8% internal rate of return is 12% Investment NPV= present value of inflow- outflow Investment (1750/12%)    14,583.33 Total cash inflow for 3 years    21,875.00 cash saving per year            2,431 (21875-14583)/3 3) Initial cost          60,096 IRR 18%    70,913.28 cash saving          12,000 No of years to last              5.91 4) NPV            6,075 year PV factor 1          15,000 0.909    13,635 2          20,000 0.826    16,520 3          30,000 0.751    22,530 4          27,496 0.863    23,729    76,414 NPV 6075 Cashflow in year 4          27,496 Cost of project          82,488

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