Note to SME: Replace the variables that are highlighted so that you can provide the numerical data of the required investment, annual cash flows, annual net income, average book value, and cost of capital to students. The project life must have a value of 15 years. Important: Delete this note and remove highlighting before sending to students. Furnace Fuel Air Scrubbers Change Required Investment S 225,000 | S 150,000 Annual Cash Flows S 60,000 | S 56,000 | |Annua| Net Income S 38,000 S 34,000 | |Project Life 15 years 15 years |Average Book Value S 112,500 | $ 75,000 | Cost of Capital 10% 10% Air Scrubbers Average Net Income Average Book Value 1 38,000 | 217,500 | 2 38,000 202,500 | | 3 38,000 187,500 | | 4 38,000 172,500 | | 5 38,000 157,500 | | 6 38,000 142,500 | o s | | o 38,000 97,500 | | 10 38,000 82,500 | | 11 38,000 67,500 | | 12 38,000 52,500 | | 13 38,000 37,500 | | 14 38,000 22,500 | 15 38,000 7,500 Average | $ 38,000 | $ 112,500 Average Net Income 1 34,000 | 2 34,000 | 3 34,000 | 4 34,000 | 5 34,000 | 6 34,000 | 7 34,000 | 8 34,000 | o 34,000 | 10 34,000 | 11 34,000 | 12 34,000 | 13 34,000 | 14 34,000 15 34,000 Furnace Fuel Change Average | $ 34,000 | $ 75,000 Average Book Value 145,000 135,000 125,000 115,000 105,000 95,000 85,000 75,000 65,000 55,000 45,000 35,000 25,000 15,000 5,000 Furnace Fuel Change I Air Scrubbers | Net Present Value using the Annuity Table to determine PV of cash flow Net Present Value using the Annuity Table to determine PV of cash flow I NPV = Initial Cost + (Net Annual Cash Flow x Factor) Amount Factor Present Value I NPV = Initial Cost + (Net Annual Cash Flow x Factor) Amount Factor Present Value | nitial investment S 225,000 1 S 225,000 | | nitial investment S 150,000 1 S 150,000 I PV of Annual net cash flow for 15 years S 60,000 15 900,000 | |PV of Annual net cash flow for 15 years S 56,000 15 840,000 | Net present value $ 1,125,000 | Net present value S 990,000 | OR | OR Net Present Value Using Excel to determine PV cash flow Net Present Value Using Excel to determine PV cash flow Present Value 225,000 900,000 1,125,000 NPV = Initial Cost + PV of Cash Flow I Initial investment I PV of Annual net cash flow for 15 years =PV(rate,valuel,[value2]) Net present value S Present Value 150,000 840,000 990,000 NPV = Initial Cost + PV of Cash Flow Ilnitial investment |PV of Annual net cash flow for 15 years =PV(rate,valuel,[value2]) Net present value S Payback Period = Initial Investment / Net Annual Cash Flow Payback Period = Initial Investment / Net Annual Cash Flow Internal Rate of Return | Using Annuity Table 11250.0 OR IUsing Excel =IRR(M6:M21) use the IRR worksheet Average Rate of Return = Ave Net Income / Ave Book Value of investment 0.178571429 0.178571429 Internal Rate of Return Using Annuity Table 7500 OR |Using Excel =IRR(M26:M41) use the IRR worksheet Average Rate of Return = Ave Net Income / Ave Book Value of investment 0.337777778 0.4533333333