Discounted cash flow. Where do I start to get these answers without any positive

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Discounted cash flow. Where do I start to get these answers without any positive cash flow given, other than the scrap value of the old equipment and the savings of the new machines operating cost?

CALCULATOR PRINTER VERSION 4 BACK NEXT Far or Fashions needs to replace a belt o p attacher that currently costs the company?32,000 n annual cash oper could be sold as scrap for $2,650. Managers have identified a potential replacement machine, Euromat's Model HD-435. ating costs. This machine is of no use to another company, but it The HD-435 is priced at $56,073 and would cost Farrior Fashions $22,000 in annual cash operating costs. The machine has a useful life of 13 years, and it is not expected to have salvage value at the end of that time. a) Calculate the net present value of purchasing the HD-435, assuming Farrior Fashions uses a 14% discount rate. (Forcalculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to o decimal place, e.g. 58,971.) Net present value (b) Calculate the internal rate of return on the HD-435 75423 Internal rate of return 16 (c) calculate the payback period of the HD-435. (Round answer to 4 decinal places, e.?. 15.251s) Payback period (d) Calculate the accounting rate of return on the HD-435. (Round answer to 2 decimal places, e.g. 11.25%%.) Accounting rate of 5.6073 years 18.72 return (e) Should Farrior Fashions purchase the HD-435? Yes v

Explanation / Answer

The initial cost=56073-2650=53423
The cash flows for year 1 to 13 is =32000-22000=10000(savings)
use pv formaule in excel to find the net present value
=-53243+pv(14%,13,10000,0,0)
=-53243+58423.62
5180.62
b)16%
c)payback period=total cost/ per year cash inflow
53243/10000
=5.3243
d)Accounting rate of return=average net profit/average investment
=10000/53243=18.78%

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