Problem 15-49

Insert your answers in the gray-shaded cells or select from the drop-down list.

If an answer is incorrect, the word “wrong” will appear.

a.

Point in Time

Description

Cash Flows

x

Discount Factor

=

Present Value

0

Incremental cost

$      (5,68,000)

           1.0000

1-8

Cost savings

$        1,20,000

           5.3349

NPV

Cost savings

????????

Investment

=

Profitability Index

$6,40,188

$5,68,000

Based on NPV and PI, the machine

should

be purchased.

b.

Net investment

?

Cost savings

=

Payback

               5,68,000

$        1,20,000

years

c.

Net investment

?

Annual annuity

=

Discount factor of IRR

               5,68,000

$        1,20,000

Percent

Discount factor matches to

13%

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