Hello I need help with my wiley plus homework 1) Doug’s Custom Construction Comp

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Hello I need help with my wiley plus homework

1) Doug’s Custom Construction Company is considering three new projects, each requiring an equipment investment of $20,900. Each project will last for 3 years and produce the following net annual cash flows.

The equipment’s salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug’s required rate of return is 12%.

Compute each project’s payback period. (Round answers to 2 decimal places, e.g. 15.25.)

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2)Eisler Corporation is involved in the business of injection molding of plastics. It is considering the purchase of a new computer-aided design and manufacturing machine for $427,200. The company believes that with this new machine it will improve productivity and increase quality, resulting in an increase in net annual cash flows of $103,906 for the next 6 years. Management requires a 10% rate of return on all new investments. Calculate the internal rate of return on this new machine.

Year AA BB CC 1 $8,910 $11,605 $14,410 2 11,440 11,605 11,110 3 16,610 11,605 12,210 Total $36,960 $34,815 $37,730

Explanation / Answer

AA Year Cash Flows Discount @12% Present value cash inflows Cummulative cash flows 0 -20900 1 -20900 -20900 1 8910 0.89285714 7955.357143 -12944.64286 2 11440 0.79719388 9119.897959 -3824.744898 3 16610 0.71178025 11822.66992 7997.925018 Payback period = 2+3824/11822 = 2.323 years BB Year Cash Flows Discount @12% Present value cash inflows Cummulative cash flows 0 -20900 1 -20900 -20900 1 11605 0.89285714 10361.60714 -10538.39286 2 11605 0.79719388 9251.434949 -1286.957908 3 11605 0.71178025 8260.209776 6973.251868 Payback period = 2+1286.95/8260.21 = 2.155years CC Year Cash Flows Discount @12% Present value cash inflows Cummulative cash flows 0 -20900 1 -20900 -20900 1 14410 0.89285714 12866.07143 -8033.928571 2 11110 0.79719388 8856.82398 822.8954082 3 12210 0.71178025 8690.836826 9513.732234 Payback period = 1+8033.92/8856.82 = 1.907 years

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