if you could show work please NPV-Mutually exclusive projects Hook Industries is

Question

if you could show work please

NPV-Mutually exclusive projects Hook Industries is considering the replacement of one of its old drill presses. Three alternative replacement presses arc under consideration. The relevant cash flows associated with each are shown in the following table: The firm's cost of capital is 15%. Calculate the net present value (NPV) of cash press. Using NPV, evaluate the acceptability of cash press. Rank the presses from best to worst using NPV. Calculate the profitability index (PI) for each press. Rank the presses from best to worst using PI.

Explanation / Answer

a)       For press A

NPV = $ -2,482

For press B

NPV = $ 3,382

For press B

NPV = $ 274,918

b)       Press A = reject
Press B = accept
Press C = accept

c)        Rank according to NPV
1. Press C
2. Press B
3. Press A

d)       PI = (Present value of future cash flows)/(Initial Investment)
For press A

PI = (82118/84600) = 0.97

For Press B

PI = (63082/59700) = 1.06

For Press C

PI = (404618/129700) = 3.12

e)       Rank according to PI
1. Press C
2. Press B
3. Press A

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