Determine the EX 26-6 Cash payback method Obj. 2 Lily Products Company is considering an investment in one of two new product lines. The in- vestment required for either product line is $540,000. The net cash flows associated with each product are as follows: EMPLATE Year 1 2 3 4 Liquid Soap $170,000 150,000 120,000 100,000 70,000 40,000 40,000 30,000 $720,000 Body Lotion $ 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 $720,000 5 6 7 8 Total (Continued) 20 EX 26-7 Net present value method The following data are accumulated by Geddes Company in evaluating the purchase of $150,000 of equipment, having a four-year useful life: Obj. 3 Net Income Net Cash Flow Year 1 $42,500 $80,000 Year 2 27,500 65,000 Year 3 12,500 50,000 Year 4 2,500 40,000 a. Assuming that the desired rate of return is 15%, determine the net present value for the proposal. Use the present value table appearing in Exhibit 2 of this chapter. b. Would management be likely to look with favor on the proposal? Explain. EVR EX 26-10 Net present value method-annuity Obj. 3 Jones Excavation Company is planning an investment of $125,000 for a bulldozer. The bulldozer is expected to operate for 1,000 hours per year for five years. Customers will be charged 590 per hour for bulldozer work. The bulldozer operator costs $30 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $7,500. The bulldozer uses fuel that is expected to cost $15 per hour of bulldozer operation. a. Determine the equal annual net cash flows from operating the bulldozer b. Determine the net present value of the investment, assuming that the desired rate of return is 10%. Use the present value of an annuity table appearing in Exhibit 5 of this chapter. Round to the nearest dollar. Should Jones invest in the bulldozer, based on this analysis? Explain. d. Determine the number of operating hours such that the present value of cash flows equals the amount to be invested. Round all calculations to whole numbers c