NPVlong dash—Mutually exclusive projects???Hook Industries is considering the replacement of one of its old metal stamping machines....

Free

70.2K

Verified Solution

Question

Finance

NPVlong dash—Mutually
exclusive projects???Hook Industries is considering thereplacement of one of its old metal stamping machines. Threealternative replacement machines are under consideration. Therelevant cash flows associated with each are shown in thefollowing? table:
LOADING...
. The? firm's cost of capital is
1414?%.
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? (PI) for each press.
e.??Rank the presses from best to worst using PI.
Machine A
Machine B
Machine C
Initial investment
?(CF 0CF0?)
?$84 comma 90084,900
?$60 comma 30060,300
?$130 comma 500130,500
Year? (t)
Cash inflows
?(CF Subscript tCFt?)
1
?$17 comma 80017,800
?$12 comma 50012,500
?$49 comma 60049,600
2
?$17 comma 80017,800
?$14 comma 40014,400
?$29 comma 90029,900
3
?$17 comma 80017,800
?$16 comma 50016,500
?$19 comma 90019,900
4
?$17 comma 80017,800
?$17 comma 90017,900
?$19 comma 60019,600
5
?$17 comma 80017,800
?$20 comma 00020,000
?$20 comma 00020,000
6
?$17 comma 80017,800
?$25 comma 50025,500
?$30 comma 40030,400
7
?$17 comma 80017,800
long dash—
?$40 comma 10040,100
8
?$17 comma 80017,800
long dash—
?$50 comma 300

Answer & Explanation Solved by verified expert

3.9 Ratings (662 Votes)

NPV		Machine-A		Machine-B		Machine-C
Year	PVF at 14%	Cashflows	PV of Cf	Cashflows	PV of CF	Cashflows	PV f CF
1	0.877193	17800	15614.04	12500	10964.91	49600	43508.77
2	0.769468	17800	13696.52	14400	11080.33	29900	23007.08
3	0.674972	17800	12014.49	16500	11137.03	19900	13431.93
4	0.59208	17800	10539.03	17900	10598.24	19600	11604.77
5	0.519369	17800	9244.762	20000	10387.37	20000	10387.37
6	0.455587	17800	8109.441	25500	11617.46	30400	13849.83
7	0.399637	17800	7113.544		0	40100	16025.46
8	0.350559	17800	6239.951		0	50300	17633.12
Present value of Inflows			82571		65785		149448
Less: Investment			84900		60300		130500
NPV			-2329		5485		18948
Rank			III		II		I
Machine-C shall be accepted




Profitability Index		Machine-A		Machine-B		Machine-C
Year	PVF at 14%	Cashflows	PV of Cf	Cashflows	PV of CF	Cashflows	PV f CF
1	0.877193	17800	15614.04	12500	10964.91	49600	43508.77
2	0.769468	17800	13696.52	14400	11080.33	29900	23007.08
3	0.674972	17800	12014.49	16500	11137.03	19900	13431.93
4	0.59208	17800	10539.03	17900	10598.24	19600	11604.77
5	0.519369	17800	9244.762	20000	10387.37	20000	10387.37
6	0.455587	17800	8109.441	25500	11617.46	30400	13849.83
7	0.399637	17800	7113.544		0	40100	16025.46
8	0.350559	17800	6239.951		0	50300	17633.12
Present value of Inflows			82571		65785		149448
Divide: Investment			84900		60300		130500
Profitability Index			0.97		1.09		115
Rank			III		II		I
Machine-C shall be accepted

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

NPVlong dash—Mutuallyexclusive projects???Hook Industries is considering thereplacement of one of its old metal stamping machines. Threealternative replacement machines are under consideration. Therelevant cash flows associated with each are shown in thefollowing? table:LOADING.... The? firm's cost of capital is1414?%.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? (PI) for each press.e.??Rank the presses from best to worst using PI.Machine AMachine BMachine CInitial investment?(CF 0CF0?)?$84 comma 90084,900?$60 comma 30060,300?$130 comma 500130,500Year? (t)Cash inflows?(CF Subscript tCFt?)1?$17 comma 80017,800?$12 comma 50012,500?$49 comma 60049,6002?$17 comma 80017,800?$14 comma 40014,400?$29 comma 90029,9003?$17 comma 80017,800?$16 comma 50016,500?$19 comma 90019,9004?$17 comma 80017,800?$17 comma 90017,900?$19 comma 60019,6005?$17 comma 80017,800?$20 comma 00020,000?$20 comma 00020,0006?$17 comma 80017,800?$25 comma 50025,500?$30 comma 40030,4007?$17 comma 80017,800long dash—?$40 comma 10040,1008?$17 comma 80017,800long dash—?$50 comma 300

Machine A	Machine B	Machine C
Initial investment ?(CF 0CF0?)	?$84 comma 90084,900	?$60 comma 30060,300	?$130 comma 500130,500
Year? (t)	Cash inflows ?(CF Subscript tCFt?)
1	?$17 comma 80017,800	?$12 comma 50012,500	?$49 comma 60049,600
2	?$17 comma 80017,800	?$14 comma 40014,400	?$29 comma 90029,900
3	?$17 comma 80017,800	?$16 comma 50016,500	?$19 comma 90019,900
4	?$17 comma 80017,800	?$17 comma 90017,900	?$19 comma 60019,600
5	?$17 comma 80017,800	?$20 comma 00020,000	?$20 comma 00020,000
6	?$17 comma 80017,800	?$25 comma 50025,500	?$30 comma 40030,400
7	?$17 comma 80017,800	long dash—	?$40 comma 10040,100
8	?$17 comma 80017,800	long dash—	?$50 comma 300