Save Homework: Module 8: Chapter 10 | Hw Score: 24.17%, 9.67 of 40 pts Score: 0
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Save Homework: Module 8: Chapter 10 | Hw Score: 24.17%, 9.67 of 40 pts Score: 0 of 5 pts 20f 8 (4 complete) Question Help P10-10 (similar to) NPV-Mutually exclusive projects Hook Industries is considering the replacement of one of its old dill presses. Three alternative replacement presses are under consideration. The relevant cash flows associated with each are shown in the follow ng table: The firm's cost of capital is 13%. 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 (Pl) for each press. e. Rank the presses from best to worst using Pl a. The NPV of press A is (Round to the nearest cent.) Enter your answer in the answer box and then click Check Answer parts remaining Clear All Check AnswerExplanation / Answer
Answer:
1
Calculation of NPV
Press -A
Year
CF
Pv factor
at 13%
Prasent
value
A
B
C=A*B
0
-85500
1
-85500
1
18300
0.884956
16194.69027
2
18300
0.783147
14331.58431
3
18300
0.69305
12682.81797
4
18300
0.613319
11223.73272
5
18300
0.54276
9932.506829
6
18300
0.480319
8789.829052
7
18300
0.425061
7778.609781
8
18300
0.37616
6883.72547
NPV
2317.496388
Press -B
Year
CF
Pv factor
at 13%
Prasent
value
A
B
C=A*B
0
-60,000
1
-60000
1
12,400
0.884956
10973.45133
2
14,400
0.783147
11277.31224
3
15700
0.69305
10880.88755
4
18000
0.613319
11039.7371
5
20300
0.54276
11018.0267
6
25400
0.480319
12200.0906
NPV
7389.505512
Press -C
Year
CF
Pv factor
at 13%
Prasent
value
A
B
C=A*B
0
-129700
1
-129700
1
50400
0.884956
44601.76991
2
29900
0.783147
23416.08583
3
19600
0.69305
13583.78318
4
20200
0.613319
12389.0383
5
20400
0.54276
11072.30269
6
30,000
0.480319
14409.55582
7
40,300
0.425061
17129.94394
8
49700
0.37616
18695.14513
NPV
25597.62481
__________________________________
2 and 3
NPV
Accept/
reject
Rank
Press -A
2317.50
Accept
3
worst
Press -B
7389.51
Accept
2
Good
Press -C
25597.62
Accept
1
Best
_______________________________-
4
Profitabelity inxed
=PV of cash inflow / PV of the cash outflow
Press-A
=PV of cash inflow / PV of the cash outflow
=87817.50 /85500
=1.027
Press-B
=PV of cash inflow / PV of the cash outflow
=67389.51 /60,000
=1.123
Press-C
=PV of cash inflow / PV of the cash outflow
=155297.625 /129700
=1.197
PI
Rank
Press -A
1.0271
3
worst
Press -B
1.1232
2
Good
Press -C
1.1974
1
Best
Press -A
Year
CF
Pv factor
at 13%
Prasent
value
A
B
C=A*B
0
-85500
1
-85500
1
18300
0.884956
16194.69027
2
18300
0.783147
14331.58431
3
18300
0.69305
12682.81797
4
18300
0.613319
11223.73272
5
18300
0.54276
9932.506829
6
18300
0.480319
8789.829052
7
18300
0.425061
7778.609781
8
18300
0.37616
6883.72547
NPV
2317.496388
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