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(Click the icon to view Present Value of $1 table.) Weiler Manufacturing, Inc. has a manufacturing machine that needs attention. (Click the icon to view additional information.) Weiler expects the following net cash inflows from the two options: (Click the icon to view the net cash flows.) Weiler uses straight-line depreciation and requires an annual return of 12%. ( Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. Compute the payback, the ARR, the NPV, and the profitability index of these two options. Compute the payback for both options. Begin by completing the payback schedule for Option 1 (refurbish). Net Cash Outflows Net Cash Inflows Year Amount Invested Annual Accumulated 0 $ 1,200,000 1 2 3 4 5 6 Choose from any list or enter any number in the input fields and then continue to the next question. ? 8 (Round your answer to one decimal place.) The payback for Option 1 (refurbish current machine) is years. Now complete the payback schedule for Option 2 (purchase). Net Cash Outflows Net Cash Inflows Year Amount Invested Annual Accumulated 0 2,200,000 1 2 3 Choose from any list or enter any number in the input fields and then continue to the next question. ? 6 7 8 9 10 (Round your answer to one decimal place.) The payback for Option 2 (purchase new machine) is years. Compute the ARR (accounting rate of return) for each of the options. = ARR Refurbish % Choose from any list or enter any number in the input fields and then continue to the next question. ? Compute the ARR (accounting rate of return) for each of the options. 1 ARR Refurbish = % Purchase % Compute the NPV for each of the options. Begin with Option 1 (refurbish). (Enter the factors to three decimal places. X.XXX. Use parentheses or a minus sign for a negative net present value.) Net Cash PV Factor Present Years Inflow (i = 12%) Value 1 Present value of each year's inflow: (n = 1) (n = 2) (n = 3) 2 3 Choose from any list or enter any number in the input fields and then continue to the next question. 7 (n = 7) 8 (n = 8) Total PV of cash inflows 0 Initial investment Net present value of the project Now compute the NPV for Option 2 (purchase). (Enter the factors to three decimal places. X.XXX. Use parentheses or a minus sign for a negative net present value.) Net Cash PV Factor Present Years Inflow (i = 12%) Value 1 Present value of each year's inflow: (n = 1) (n = 2) 2 Choose from any list or enter any number in the input fields and then continue to the next question. ? Net Cash PV Factor Present Years Inflow (i = 12%) Value Present value of each year's inflow: 1 2 3 4 (n = 1) (n = 2) (n = 3) (n = 4) (n = 5) (n = 6) (n = 7) (n = 8) 5 6 7 8 9 In = 9) Choose from any list or enter any number in the input fields and then continue to the next question. ? 0 Initial investment Net present value of the project Finally, compute the profitability index for each option. (Round to two decimal places X.XX.) Profitability index Refurbish = Purchase 1 II Requirement 2. Which option should Weiler choose? Why? Review your answers in Requirement 1. Weiler should choose because this option has a payback period, an ARR that is the other option, a NPV, and its profitability index is Choose from any list or enter any number in the input fields and then continue to the next question. ? Reference - Present Value of $1 Periods 1% 2% 3% 4% 5% 6% 7% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 Period 2 0.980 0.961 0.943 0.925 0.907 0.890 0.873 Period 3 0.971 0.942 0.915 0.889 0.864 0.840 0.816 Period 4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 Period 5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.666 Period 7 0.933 0.871 0.813 0.7600.7110.665 0.623 Period 8 0.923 0.853 0.789 0.731 0.677 0.627 0.582 Period 9 0.914 0.837 0.766 0.703 0.645 0.592 0.544 Period 10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 Period 11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 Period 12 0.887 0.788 0.701 0.625 0.557 0.497 0.444 Period 13 0.879 0.773 0.681 0.601 0.530 0.469 0.415 Period 14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 Period 15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 Period 16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 Period 17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 Period 18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 Period 19 0.828 0.686 0.570 0.475 0.396 0.331 0.277 Period 20 0.820 0.673 0.554 0.456 0.377 0.312 0.258 8% 9% 10% 12% 14% 15% 16% 18% 20% 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0.847 0.833 0.857 0.842 0.826 0.797 0.769 0.756 0.743 0.7180.694 0.794 0.772 0.751 0.712 0.675 0.658 0.641 0.609 0.579 0.735 0.708 0.683 0.636 0.592 0.572 0.552 0.516 0.482 0.681 0.650 0.621 0.567 0.519 0.497 0.476 0.437 0.402 0.630 0.596 0.564 0.507 0.456 0.432 0.410 0.370 0.335 0.583 0.547 0.513 0.452 0.400 0.376 0.354 0.314 0.279 0.540 0.502 0.467 0.404 0.351 0.327 0.305 0.266 0.233 0.500 0.460 0.424 0.361 0.308 0.284 0.263 0.225 0.194 0.463 0.422 0.386 0.322 0.270 0.247 0.227 0.191 0.162 0.429 0.388 0.350 0.287 0.237 0.215 0.1950.162 0.135 0.397 0.356 0.319 0.257 0.208 0.187 0.168 0.137 0.112 0.368 0.326 0.290 0.229 0.182 0.163 0.145 0.116 0.093 0.340 0.299 0.263 0.205 0.160 0.141 0.125 0.099 0.078 0.315 0.275 0.239 0.183 0.140 0.123 0.108 0.084 0.065 0.292 0.252 0.218 0.163 0.123 0.107 0.093 0.071 0.054 0.270 0.231 0.198 0.146 0.108 0.093 0.080 0.060 0.045 0.250 0.212 0.180 0.130 0.095 0.081 0.069 0.051 0.038 0.232 0.194 0.164 0.116 0.070 0.060 0.043 0.031 0.215 0.178 0.149 0.104 | 0.073 | 0.061 0.051 0.037 0.026 0.083 Print Done Present Value of Ordinary Annuity of $1 Periods Period 1 Period 2 Period 3 Period 4 Period 5 1% 2% 0.990 0.980 1.970 1.942 2.941 2.884 3.902 3.808 4.853 4.713 3% 0.971 1.913 2.829 3.717 4.580 4% 0.962 1.886 2.775 3.630 4.452 5% 6% 7% 0.952 0.943 0.935 1.859 1.833 1.808 2.723 2.673 2.624 3.546 3.465 3.387 4.329 4.212 4.100 8% 9% 10% 0.926 0.917 0.909 1.783 1.759 1.736 2.577 2.531 | 2.487 3.312 3.240 3.170 3.993 3.890 3.791 12% 14% 15% 16% 0.893 0.877 0.870 0.862 1.690 1.647 1.626 1.605 2.402 2.322 2.283 2.246 3.037 2.914 2.855 2.798 3.605 3.433 3.352 3.274 18% 20% 0.847 0.833 1.566 1.528 2.174 2.106 2.690 2.589 3.127 2.991 Period 6 Period 7 Period 8 Period 9 Period 10 5.795 5.601 6.728 6.472 7.652 7.325 8.566 8.162 9.471 8.983 5.417 6.230 7.020 7.786 8.530 5.242 5.076 4.917 4.767 6.002 5.786 5.582 5.389 6.733 6.463 6.210 5.971 7.435 7.108 6.802 6.515 8.111 7.722 7.360 7.024 4.623 4.486 4.355 5.206 5.033 4.868 5.747 5.535 5.335 6.247 5.995 5.759 6.710 6.418 6.145 4.111 3.889 4.564 4.288 4.968 4.639 5.328 4.946 5.650 5.216 3.784 4.160 4.487 4.772 5.019 3.685 4.039 4.344 4.607 4.833 3.498 3.326 3.812 3.605 4.078 3.837 4.303 4.031 4.494 4.192 Period 11 Period 12 Period 13 Period 14 Period 15 10.368 9.787 9.253 8.760 8.306 7.887 7.499 11.255 10.575 9.954 9.385 8.863 8.384 7.943 12.134 | 11.348 10.635 | 9.986 9.394 8.853 8.358 13.004 | 12.106 | 11.296 | 10.563 9.899 9.295 8.745 13.865 12.849 | 11.938 11.118 10.380 9.712 9.108 7.139 6.805 6.495 7.536 7.1616.814 7.904 7.487 7.103 8.244 | 7.786 7.367 8.559 8.061 | 7.606 5.938 5.453 5.234 6.194 5.660 5.421 6.424 5.842 5.583 6.628 6.002 5.724 6.811 6.142 5.847 5.029 5.197 5.342 5.468 5.575 4.656 4.327 4.793 4.439 4.910 4.533 5.008 4.611 5.092 4.675 Period 16 Period 17 Period 18 Period 19 Period 20 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824 15.562 14.292 13.166 12.166 11.274 10.4771 9.763 9.122 8.544 8.022 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.129 8.514 6.974 6.265 7.120 6.373 7.250 6.467 7.366 6.550 7.469 6.623 5.954 6.047 6.128 6.198 6.259 5.669 5.749 5.818 5.877 5.929 5.162 4.730 5.222 4.775 5.273 4.812 5.316 4.844 5.353 4.870 Print Done Future Value of $1 Periods Period 1 Period 2 Period 3 Period 4 Period 5 1% 1.010 1.020 1.030 1.041 1.051 2% 1.020 1.040 1.061 1.082 1.104 3% 1.030 1.061 1.093 1.126 1.159 4% 5% 1.040 1.050 1.082 1.103 1.125 1.158 1.170 1.216 1.217 1.276 6% 7% 1.060 1.070 1.1241.145 1.191 1.225 1.262 1.311 1.338 1.403 8% 9% 10% 1.080 1.090 1.100 1.166 1.1881.210 1.260 1.295 1.331 1.360 1.412 1.464 1.469 1.539 1.611 12% 1.120 1.254 1.405 1.574 1.762 14% 15% 1.140 1.150 1.300 1.323 1.482 1.521 1.689 1.749 1.925 2.011 Period 6 Period 7 Period 8 Period 9 Period 10 1.062 1.072 1.083 1.094 1.105 1.126 1.149 1.172 1.195 1.219 1.194 1.230 1.267 1.305 1.344 1.265 1.340 1.316 1.407 1.369 1.477 1.423 1.551 1.480 1.629 1.419 1.501 1.587 1.677 1.772 1.5041.606 1.714 | 1.828 1.949 1.594 1.718 1.851 1.993 2.144 1.689 1.838 1.999 2.172 2.358 1.791 1.967 2.159 2.367 2.594 1.974 2.195 | 2.313 2.211 2.502 2.660 2.476 2.853 3.059 2.773 3.252 3.518 3.106 3.707 4.046 Period 11 Period 12 Period 13 Period 14 Period 15 1.116 1.127 1.138 1.149 1.161 1.243 1.268 1.294 1.319 1.346 1.384 1.426 1.469 1.513 1.558 1.539 1.710 1.601 1.796 1.665 1.886 1.732 1.980 1.801 | 2.079 1.898 2.105 2.332 2.580 2.853 2.012 2.252 2.518 2.813 3.138 2.133 2.410 2.720 3.066 3.452 2.261 2.579 2.937 3.342 3.798 2.397 2.759 3.172 3.642 4.177 3.479 3.896 4.363 4.887 5.474 4.226 4.652 4.818 5.350 5.4926.153 6.261 7.076 7.1388.137 Period 16 Period 17 Period 18 Period 19 Period 20 1.173 1.184 1.196 1.208 1.220 1.373 1.400 1.428 1.457 1.486 1.605 1.873 2.183 1.653 1.948 2.292 1.702 2.026 | 2.407 1.754 2.107 2.527 1.806 2.191 | 2.653 2.540 2.952 3.426 3.970 4.595 2.693 3.1593.700 4.328 5.054 2.854 3.380 3.996 4.717 5.560 3.026 3.617 4.316 5.142 6.116 3.207 | 3.870 4.661 5.604 6.727 6.130 8.137 | 9.358 6.866 9.276 10.76 7.690 10.58 12.38 8.613 12.06 14.23 9.646 13.74 16.37 Print Done Future Value of Ordinary Annuity of $1 Periods Period 1 Period 2 Period 3 Period 4 Period 5 1% 2% 3% 4% 5% 6% 1.000 1.000 1.000 1.000 1.000 1.000 2.010 2.020 2.030 2.040 2.050 2.060 3.030 3.060 3.091 3.122 3.153 3.184 4.060 4.122 4.184 4.246 4.310 4.375 5.101 5.204 5.309 5.416 5.526 5.637 7% 1.000 2.070 3.215 4.440 5.751 8% 9% 10% 12% 14% 15% 1.000 1.000 1.000 1.000 1.000 1.000 2.080 2.090 2.100 2.120 2.140 2.150 3.246 3.278 3.310 3.374 3.440 3.473 4.506 4.573 4.641 4.779 4.921 4.993 5.867 5.985 6.105 6.353 6.610 6.742 Period 6 Period 7 Period 8 Period 9 Period 10 6.152 6.308 6.468 6.633 6.802 6.975 7.153 7.336 7.523 7.716 7.214 7.434 7.662 7.898 8.142 8.394 8.654 8.923 9.200 9.487 8.286 8.583 8.892 9.214 9.549 9.897 10.260 10.64 | 11.03 11.44 9.369 9.755 10.16 10.58 11.03 11.49 11.98 12.49 13.02 13.58 10.46 10.95 11.46 12.01 12.58 13.18 13.82 14.49 15.1915.94 8.115 8.536 8.754 10.09 10.73 11.07 12.30 13.23 13.73 14.78 16.09 16.79 17.55 19.34 20.30 Period 11 Period 12 Period 13 Period 14 Period 15 11.57 12.17 12.8113.49 14.21 12.68 13.41 14.19 15.03 15.92 13.81 14.68 15.62 16.63 17.71 14.95 15.97 17.09 18.2919.60 16.10 17.29 18.60 20.02 21.58 14.97 15.78 16.87 17.89 18.88 20.14 21.02 22.55 23.28 25.13 16.65 17.56 18.53 20.65 23.04 24.35 18.98 20.14 21.38 24.13 27.27 29.00 21.50 22.95 24.52 28.03 32.09 34.35 24.21 26.02 27.98 32.39 37.58 40.50 27.15 29.36 | 31.77 37.28 43.84 47.58 Period 16 Period 17 Period 18 Period 19 Period 20 17.26 18.64 20.16 21.82 23.66 18.43 20.01 21.76 23.70 25.84 19.61 21.41 23.41 25.65 | 28.13 20.81 22.84 25.12 27.67 30.54 22.02 24.30 26.87 29.7833.07 25.67 27.89 28.21 30.84 30.91 34.00 33.76 37.38 36.79 41.00 30.32 33.00 35.95 42.75 50.98 55.72 33.75 36.97 40.54 48.88 59.12 65.08 37.45 41.30 45.60 55.75 68.39 75.84 41.45 46.02 51.16 63.44 78.97 88.21 45.76 51.16 57.28 72.05 | 91.02 102.4 More Info The company is considering two options. Option 1 is to refurbish the current machine at a cost of $1,200,000. If refurbished, Weiler expects the machine to last another eight years and then have no residual value. Option 2 is to replace the machine at a cost of $2,200,000. A new machine would last 10 years and have no residual value. Print Done Refurbish Current Machine Purchase New Machine Year Year 1 $ 580,000 $ Year 2 440,000 2,000,000 500,000 400,000 300,000 Year 3 340,000 240,000 140,000 200,000 Year 4 Year 5 Year 6 Year 7 140,000 200,000 140,000 200,000 200,000 Year 8 140,000 Year 9 200,000 200,000 Year 10 $ 2,160,000 $ 4,400,000 Total Print Done i Requirements X 1. Compute the payback, the ARR, the NPV, and the profitability index of these two options. 2. Which option should Weiler choose? Why? Print Done
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