Down below is the Chart where the New and Old Backhoes are displayed. Follow these Instructions: Start from 0 years to 8 years when calculating the Net present Value using the PVF Formula. For example PVF = 1 (1=8%) ^0 A. Calculate the net present value of the old backhoes and the new backhoes. B. Discuss the net present value of each, including what the calculations reveal about whether the company should purchase the new backhoes or continue using the old backhoes. C. Calculate the payback period for keeping the old backhoes and purchasing the new backhoes. (Hint: For the old machines, evaluate the payback of an overhaul.) D. Discuss the payback method and what the payback periods of the old backhoes and new backhoes reveal about whether the company should purchase new backhoes or continue using the old backhoes. Calculate the profitability index for keeping the old backhoes and purchasing new backhoes. The following information is available to use in deciding whether to purchase the new backhoes or old backhoes. Using the 8% Present Value of an Annuity of 1. Start from 0 years to 8 years when calculating the Net present Value using the PVF Formula. For example PVF = 1 (1=8%) ^0 Old Backhoes New Backhoes Purchase cost when new $90,000 $200,000 Salvage value now $42,000 Investment in major overhaul needed in next year $55,000 Salvage value in 8 years $15,000 $90,000 Remaining life 8 years 8 years Net cash flow generated each year $30,425 $43,900 check_circle
Down below is the Chart where the New and Old Backhoes are displayed. Follow these Instructions:
Start from 0 years to 8 years when calculating the
A. Calculate the net present value of the old backhoes and the new backhoes.
B. Discuss the net present value of each, including what the calculations reveal about whether the company should purchase the new backhoes or continue using the old backhoes.
C. Calculate the payback period for keeping the old backhoes and purchasing the new backhoes. (Hint: For the old machines, evaluate the payback of an overhaul.)
D. Discuss the payback method and what the payback periods of the old backhoes and new backhoes reveal about whether the company should purchase new backhoes or continue using the old backhoes. Calculate the profitability index for keeping the old backhoes and purchasing new backhoes.
- The following information is available to use in deciding whether to purchase the new backhoes or old backhoes. Using the 8% Present Value of an
Annuity of 1. - Start from 0 years to 8 years when calculating the Net present Value using the PVF Formula. For example PVF = 1 (1=8%) ^0
|
Old Backhoes |
New Backhoes |
||
|
Purchase cost when new |
$90,000 |
$200,000 |
|
|
Salvage value now |
$42,000 |
||
|
Investment in major overhaul needed in next year |
$55,000 |
||
|
Salvage value in 8 years |
$15,000 |
$90,000 |
|
|
Remaining life |
8 years |
8 years |
|
|
Net cash flow generated each year |
$30,425 |
$43,900 |
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