Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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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 with each are shown in the following table:
13%.
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 $
(Round to the nearest cent.)
Data table
(Click on the icon here
into a spreadsheet.)
Initial investment (CF)
Year (t)
1
234
5
in order to copy the contents of the data table below
678
Machine A
$85,000
$17,700
$17,700
$17,700
$17,700
$17,700
$17,700
$17,700
$17,700
Print
Machine B
$60,100
Cash inflows (CFt)
$11,900
$13,700
$16,400
$18,400
$20,400
$25,100
Done
Machine C
$130,100
$50,200
$29,900
$20,400
$19,700
$20,200
$30,000
$40,500
$50,300
X
The firm's cost of capital is
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Transcribed Image Text: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 with each are shown in the following table: 13%. 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 $ (Round to the nearest cent.) Data table (Click on the icon here into a spreadsheet.) Initial investment (CF) Year (t) 1 234 5 in order to copy the contents of the data table below 678 Machine A $85,000 $17,700 $17,700 $17,700 $17,700 $17,700 $17,700 $17,700 $17,700 Print Machine B $60,100 Cash inflows (CFt) $11,900 $13,700 $16,400 $18,400 $20,400 $25,100 Done Machine C $130,100 $50,200 $29,900 $20,400 $19,700 $20,200 $30,000 $40,500 $50,300 X The firm's cost of capital is
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