Chapter 10, Problem 10.10P

a)

Summary Introduction

To determine:

The Net Present Value for each press.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

$\begin{array}{c}NPV=\frac{{\text{CF}}_1}{{\left(\text{1}+r\right)}^1}+\frac{{\text{CF}}_2}{{\left(1+r\right)}^2}+\frac{{\text{CF}}_3}{{\left(1+r\right)}^3}+\frac{{\text{CF}}_4}{{\left(1+r\right)}^4}-I0\\ \end{array}$

b)

Summary Introduction

To determine:

The acceptability of each press based on NPV.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value. NPV is used in capital budgeting as a criterion to analyze the profitability of projects.

c)

Summary Introduction

To determine:

Ranking of the press from the best to worst.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

d)

Summary Introduction

To determine:

The profitability index of each press.

Introduction:

Profitability Index which is an index that measures that the costs and benefits of a project as the ratio of present value of future cash flows to the initial investment.

e)

Summary Introduction

To determine:

Ranking of the press from the best to worst using PI.

Introduction:

Profitability Index which is an index that measures that the costs and benefits of a project as the ratio of present value of future cash flows to the initial investment.