Dixie Dynamite Company is evaluating two methods of blowing up old buildings for commercial purposes over...

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Dixie Dynamite Company is evaluating two methods of blowing upold buildings for commercial purposes over the next five years.Method one (implosion) is relatively low in risk for this businessand will carry a 12 percent discount rate. Method two (explosion)is less expensive to perform but more dangerous and will call for ahigher discount rate of 17 percent. Either method will require aninitial capital outlay of $85,000. The inflows from projectedbusiness over the next five years are shown next.

Years Method 1 Method 2
1 $ 30,000 $ 20,200
2 30,200 22,100
3 39,300 37,100
4 36,300 29,000
5 25,700 77,100

Use Appendix B for an approximate answer but calculate your finalanswers using the formula and financial calculator methods.

a. Calculate net present value for Method 1 andMethod 2.(Do not round intermediate calculations and roundyour answers to 2 decimal places.)

method 1 Net present Value _
Method 2 Net present Value ____

Answer & Explanation Solved by verified expert

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Method I Net present value is solved using a financial calculator The steps to solve on the financial calculator Press the CF button CF0 85000 It is entered with a negative sign since it is a cash outflow Cash flow for See Answer

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Dixie Dynamite Company is evaluating two methods of blowing upold buildings for commercial purposes over the next five years.Method one (implosion) is relatively low in risk for this businessand will carry a 12 percent discount rate. Method two (explosion)is less expensive to perform but more dangerous and will call for ahigher discount rate of 17 percent. Either method will require aninitial capital outlay of $85,000. The inflows from projectedbusiness over the next five years are shown next. YearsMethod 1Method 21$30,000$20,200230,20022,100339,30037,100436,30029,000525,70077,100 Use Appendix B for an approximate answer but calculate your finalanswers using the formula and financial calculator methods.a. Calculate net present value for Method 1 andMethod 2.(Do not round intermediate calculations and roundyour answers to 2 decimal places.) method 1 Net present Value _____________Method 2 Net present Value ________________

Years	Method 1		Method 2
1	$	30,000	$	20,200
2		30,200		22,100
3		39,300		37,100
4		36,300		29,000
5		25,700		77,100