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 with each are shown in the following table attached. The firm's cost of capital is 10%. d. Calculate the profitability index (PI) for each press. e. Rank the presses from best to worst using PI
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 with each are shown in the following table attached. The firm's cost of capital is 10%. d. Calculate the profitability index (PI) for each press. e. Rank the presses from best to worst using PI
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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 with each are shown in the following table attached.
The firm's cost of capital is 10%.
d. Calculate the profitability index (PI) for each press.
e. Rank the presses from best to worst using PI.
Transcribed Image Text:Data table
(Click on the icon here in order to copy the contents of the data table below
into a spreadsheet.)
Machine A
Machine B
Machine C
Initial investment (CF,)
$84,500
$60,400
$130,200
Year (t)
Cash inflows (CF,)
1
$18,500
$12,500
$50,200
$18,500
$14,300
$29,900
3
$18,500
$15,900
$20,200
4
$18,500
$18,200
$20,400
$18,500
$20,100
$20,300
6.
$18,500
$24,500
$30,200
7
$18,500
$39,700
8
$18,500
$50,400
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