Long-term investment decision, payback method Personal Finance Problem Bill Williams has the opportunity to invest in project A that costs $9,100 today and promises to pay $2,300, $2,500, $2,500, $2,100 and $1,900 over the next 5 years. Or, Bill can invest $9,100 in project B that promises to pay $1,600, $1,600, S1,600, $3,500 and $4,000 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.) NPV Calculate the net present value (NPV) for a 15-year project with an initial investment of $45,000 and a cash inflow of $7,000 per year. Assume that the firm has an opportunity cost of 14%. Comment on the acceptability of the project. The project's net present value is $ (Round to the nearest cent.) P10-10 (similar to) Question Help 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: The firm's cost of capital is 11%. 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.) X Data Table (Click on the icon here into a spreadsheet.) in order to copy the contents of the data table below Machine A $84,900 Machine C $130,100 Initial investment (CF) Year (t) 1 2 Machine B $59,900 Cash inflows (CF) $12,400 $14,200 $16,100 $17,900 $20,200 $24,500 $17.900 $17,900 $17,900 $17,900 $17,900 $17,900 $17,900 $17,900 4 5 6 7 8 $49,900 $30,300 $20,400 $19,800 $19,900 $29,700 $39,800 $50,200 Print Done