Long-term investment decision, payback method Personal Finance Problem Bill Williams has the opportunity to invest in project A that costs $6,700 today and promises to pay $2,100, $2,500, $2,500, $2,000 and $1,800 over the next 5 years. Or, Bill can invest $6,700 in project B that promises to pay $1,500, $1,500, $1,500, $3,400 and $4, 100 over the next 5 years. (Hint: For mixed stream cash inflows, calculate cumulative cash inflows on a year-to-year basis until the initial investment is recovered.) a. How long will it take for Bill to recoup his initial investment in project A? b. How long will it take for Bill to recoup his initial investment in project B? c. Using the payback period, which project should Bill choose? d. Do you see any problems with his choice? a. For Bill to recoup his initial investment in project A, it will take years. (Round to two decimal places.) NPVMutually 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: E. The firm's cost of capital is 14%. 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 (Pl) 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 located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Initial investment (CF) Year (t) Machine C $129,900 1 2 3 4 5 Machine A Machine B $84,700 $60,000 Cash inflows (CF) $17,600 $12,000 $17,600 $14,000 $17,600 $15,600 $17,600 $18,200 $17,600 $19,900 $17,600 $24,900 $17,600 $17,600 $49,500 $29,800 $20,100 $19,600 $20,400 $29,500 $39,600 $50,400 6 7 8 Print Done