NPV Mutually exclusive projects Hook Industries is considering the replacement of one of its old metal stamping machines. Three alternative replacement machines are under consideration. The cash flows associated weach are shown in the following table. The firm's cost of capital is 10%a. Calculate the net presont value (NPV) of each pressb. Using NPV, evaluate the acceptability of each pressc. Rank the presses from best to worst using NPVd. Calculate the profitability index (Pl) for each press.e. Rank the presses from best to worst using Pl.a. The NPV of press A is $(Round to the nearest cent.)The NPV of press B is $(Round to the nearest cont.)The NPV of press C is $(Round to the nearest cent.)b. Based on NPV, Hook Industries should accept press A (Select from the drop-down menu.)Based on NPV, Hook Industries should accept press B. (Select from the drop-down menu)***DBased on NPV, Hook Industries should reject press C. (Select from the drop-down menu.)c. In ranking the presses from best to worst, Press C is the number 1 investment. (Select from the drop-down menu.)Press C is the number 2 investment. (Select from the drop-down menu.)Press B is the number 3 investment. (Select from the drop-down menu.)d. The Pl of press A is (Round f two decimal places.)The PI of press B is(Round to two decimal places.)The Pl of press C is(Round to two decimal places.)e. In ranking the presses from best to worst, Press C is the number 1 investment. (Select from the drop-down menu.)Press A is the number 2 investment. (Select from the drop-down menu.)Press B is the number 3 investment. (Select from the drop-down menu.) Data table(Click on the icon here in order to copy the contents of the data table belowinto a spreadsheet.)Machine AMachine BMachine CInitial investment (CF)$84,900$60,100$129,700Year (t)Cash inflows (CFt)1$18,300$11,800$49,5002$18,300$13,500$30,300$18,300$16,400$19,500$18,300$17,600$19,900$18,300$20,500$20,500$18,300$25,200$30,200$39,600$18,300$18,300$49,500567AWN348PrintDoneXKjone

Given Cash flows are as; Discount rate is 10% To Find: Net present Value Profitability Index

Answered: NPV Mutually exclusive projects Hock…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 9P

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Net present value method, internal rate of return method, and analysis for a service company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: The wind turbines require an investment of 887,600, while the biofuel equipment requires an investment of 911,100. No residual value is expected from either project. Instructions 1. Compute the following for each project: A. The net present value. Use a rate of 6% and the present value of an annuity table appearing in Exhibit 5 of this chapter. B. A present value index. (Round to two decimal places.) 2. Determine the internal rate of return for each project by (A) computing a present value factor for an annuity of 1 and (B) using the present value of an annuity of 1 table appearing in Exhibit 5 of this chapter. 3. What advantage does the internal rate of return method have over the net present value method in comparing projects?
CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE PROJECTS Project S requires an initial outlay at t = 0 of 17,000, and its expected cash flows would be 5,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of 30,000, and its expected cash flows would be 8,750 per year for 5 years. If both projects have a WACC of 12%, which project would you recommend? Explain.
NPV—Mutually exclusive projects Hook Industries is considering the replacement of one of its old metal stamping machines. Three alternative replacement machines are under consideration. The relevant cash flows associated with each are shown in the following table: LOADING... . The firm's cost of capital is 12%. 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. a. The NPV of press A is . (Round to the nearest cent.) The NPV of press B is . (Round to the nearest cent.) The NPV of press C is . (Round to the nearest cent.) b. Based on NPV, Hook Industries shouldpress A. (Select from the drop-down menu.) Based on NPV, Hook Industries should accept accept reject press B. (Select from the drop-down menu.) Based on NPV, Hook…
NPV—Mutually exclusive projects Hook Industries is considering the replacement of one of its old metal stamping machines. Three alternative replacement machines are under consideration. The relevant cash flows associated with each are shown in the following table: LOADING... . The firm's cost of capital is 12%. 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. a. The NPV of press A is $nothing. (Round to the nearest cent.) The NPV of press B is $nothing. (Round to the nearest cent.) The NPV of press C is $nothing. (Round to the nearest cent.) b. Based on NPV, Hook Industries should ▼ accept reject press A. (Select from the drop-down menu.) Based on NPV, Hook Industries should ▼ accept reject press B. (Select from…
NPVs and IRRs for Mutually Exclusive Projects Davis Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Because both forklifts perform the same function, the firm will choose only one. (They are mutually exclusive investments.) The electric-powered truck will cost more, but it will be less expensive to operate; it will cost $23,000, whereas the gas-powered truck will cost $17,100. The cost of capital that applies to both investments is 11%. The life for both types of truck is estimated to be 6 years, during which time the net cash flows for the electric-powered truck will be $6,500 per year and those for the gas-powered truck will be $4,950 per year. Annual net cash flows include depreciation expenses. Calculate the NPV for each type of truck. Do not round intermediate calculations. Round your answers to the nearest dollar. Electric-powered truck $____ Gas-powered truck $____ Calculate the IRR for each…

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