NPV-Mutually exclusive projects Hook Industries is considering the replacement o

Question

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.?. The firm's cost of capital is 15% 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 Pl a. The NPV of press A is S(Round to the nearest cent.) Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Machine A $85,000 Machine B $60,000 Cash inflows (CFt) $12,000 $14,000 $16,000 $18,000 $20,000 $25,000 MachineC $130,000 Initial investment (CFo) Year (t) $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $50,000 $30,000 $20,000 $20,000 $20,000 $30,000 $40,000 $50,000 4 Check Answer

Explanation / Answer

Rate = R = 15% Year Cash flows Discount factor = Df = 1/(1+R)^Year Present value = Df x Cash flows 0 -$85,000.00 $1.00 -$85,000.00 1 $18,000.00 $0.87 $15,652.17 2 $18,000.00 $0.76 $13,610.59 3 $18,000.00 $0.66 $11,835.29 4 $18,000.00 $0.57 $10,291.56 5 $18,000.00 $0.50 $8,949.18 6 $18,000.00 $0.43 $7,781.90 7 $18,000.00 $0.38 $6,766.87 8 $18,000.00 $0.33 $5,884.23 Total of Present Value = NPV= -$4,228.21

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