Alternative 1: Keep the old freezer and have it repaired. If the old freezer is repaired, it will be kept for another eight years and then sold for its salvage value. Cost of old freezer.. Cost of repalr... $75,000 50,000 Annual expected revenues generated 63,000 Annual cash operating costs after repair 55,000 Salvage value of old freezer In 8 years. 3,000 Alternative 2: Sell the old freezer and buy a new one. The new freezer is larger than the old one and will allow the company to expand its product offerings, thereby generating more revenues. Also, it is more energy efficient and will yield substantial operating cost savings. Cost of new freezer .. $150,000 Salvage value of old freezer now . 5,000 Annual expected revenues generated . 68,000 Annual cash operating costs . 30,000 Salvage value of new freezer In 8 years.. 8,000 Required 1. Determine the net present value of alternative 1. 2. Determine the net present value of alternative 2. 3. Which alternative do you recommend that management select? Explain.

Sheffield had an incredible year in its landscaping business. With extra cash available, the company is considering one of two possible investments: 1. 2. An additional trailer, to allow for more flexibility in planning and working different jobs simultaneously. A third truck that would allow for additional jobs, but this option would also require an additional worker and the costs associated with hiring. payroll taxes, etc. Financial information for each option is as follows. Initial investment Net annual cash inflow Years of useful life Salvage value Tax rate Required rate of return (a) Option 1 $29,800 $10,400 IRR 4 Option 1 $- 20% 9% Option 2 $41,000 $10,400 % 5 $2,100 Calculate the IRR for both investment options. (Round answers to 2 decimal places, e.g. 15.25%) 20% 9% Option 2 % SUPPORT 11:23 AM

Russell Trent was recently tasked with evaluating projects for Stan's No Touch Car Wash. The company recently decided to use NPV as its primary criterion for approving projects. To be selected, a project must have a positive NPV. Russell is currently evaluating a project with the following estimated investment requirements ($ millions) by year (starting in year 0): \ Investment Year Investment 0 16 1 10.1 2 12.5 The estimated revenues ($ millions) from the project, expected to begin at time 2, are given in the table below: Investment Year Investment 0 11.1 1 11.3 2 8.2 3 14.3 4 11.9 To account for the different risk characteristics throughout the project's life, Russell has determined that a hurdle rate of 23% should be used beginning at time 0, while 37% should be used beginning in period 4. Determine the NPV for the project. NPV=

Munch N' Crunch Snack Company is considering two possible investments: a delivery truck or a bagging machine. The delivery truck would cost $43,056 and could be used to deliver an additional 95,000 bags of pretzels per year. Each bag of pretzels can be sold for a contribution margin of $0.45. The delivery truck operating expenses, excluding depreciation, are $1.35 per mile for 24,000 miles per year. The bagging machine would replace an old bagging machine, and its net investment cost would be $61,614. The new machine would require three fewer hours of direct labor per day. Direct labor is $18 per hour. There are 250 operating days in the year. Both the truck and the bagging machine are estimated to have 7-year lives. The minimum rate of return is 13%. However, Munch N' Crunch has funds to invest in only one of the projects. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 1.833 1.736 1.690 1.626 1.528 2.673 2.487 2.402 2.283…