Andrew Lewis - CEO of Federation Ltd is evaluating a project of purchasing new factory equipment....

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Andrew Lewis - CEO of Federation Ltd is evaluating a project of purchasing new factory equipment. The details of the project proposal are as follows: . Cost: $520,000. Savings generated per year $120,000 Scrap value: $25,000 Useful life: 5 years The required rate of return is 9 percent. Present value factors for a discount rate of 9 percent for 5 periods: n 1 2 3 4 5 Present value factor (9%) 0.917 0.842 0.772 0.708 0.650 Required: 1. Calculate the net present value (NPV) for the proposed purchase of new equipment. Need to specify whether the project is acceptable. Ignore taxation. (7 marks) Click or tap here to enter text. 2. Explain how money is said to have a 'time value. (3 marks) Click or tap here to enter text. Andrew Lewis - CEO of Federation Ltd is evaluating a project of purchasing new factory equipment. The details of the project proposal are as follows: . Cost: $520,000. Savings generated per year $120,000 Scrap value: $25,000 Useful life: 5 years The required rate of return is 9 percent. Present value factors for a discount rate of 9 percent for 5 periods: n 1 2 3 4 5 Present value factor (9%) 0.917 0.842 0.772 0.708 0.650 Required: 1. Calculate the net present value (NPV) for the proposed purchase of new equipment. Need to specify whether the project is acceptable. Ignore taxation. (7 marks) Click or tap here to enter text. 2. Explain how money is said to have a 'time value. (3 marks) Click or tap here to enter text.

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1 Calculation of present value of cash flows Initial investment Annual cash i... View the full answer