Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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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:
LOADING...
.12%.
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 PI.
a. The NPV of press A is
.
(Round to the nearest cent.)The NPV of press B is
.
(Round to the nearest cent.)The NPV of press C is
.
(Round to the nearest cent.)b. Based on NPV, Hook Industries should
press A. (Select from the drop-down menu.)
press A. (Select from the drop-down menu.)
Based on NPV, Hook Industries should
press B. (Select from the drop-down menu.)
accept
accept
reject
Based on NPV, Hook Industries should
press C. (Select from the drop-down menu.)
accept
reject
accept
c. In ranking the presses from best to worst,
is the number 1 investment. (Select from the drop-down menu.)
Press C
Press C
Press A
Press B
Press B
Press A
Press C
Press B
Press A
Press C
Press A
Press B
d. The PI of press A is
nothing.
(Round to two decimal places.)The PI of press B is
nothing.
(Round to two decimal places.)The PI of press C is
nothing.
(Round to two decimal places.)e. In ranking the presses from best to worst,
is the number 1 investment. (Select from the drop-down menu.)
▼
Press C
Press A
Press B
▼
Press A
Press B
Press C
▼
Press B
Press C
Press A
(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
|
Machine B
|
Machine C
|
|
Initial investment
(CF0)
|
$85,200
|
$60,300
|
$130,300
|
|
Year (t)
|
(CFt)
|
|||
1
|
$17,600
|
$12,300
|
$50,200
|
|
2
|
$17,600
|
$14,400
|
$29,800
|
|
3
|
$17,600
|
$16,000
|
$19,900
|
|
4
|
$17,600
|
$18,500
|
$20,500
|
|
5
|
$17,600
|
$19,800
|
$19,900
|
|
6
|
$17,600
|
$24,900
|
$30,400
|
|
7
|
$17,600
|
—
|
$40,500
|
|
8
|
$17,600
|
—
|
$50,100
|
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