Question: NPV Mutually exclusive projects. Hook Industries is considering the replacement of one of its old metal stamping machines. Three alternative replacement machines are under consideration.
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 cash flows associated with each are shown in the following table: The firm's cost of capital is 15%.
| Machine A | Machine B | Machine C | |
| Initial investment (CF0) | $85,300 | $60,400 | $129,800 |
| Year (t) | Cash inflows (CFt) | ||
| 1 | $18,300 | $11,700 | $49,700 |
| 2 | $18,300 | $13,500 | $30,300 |
| 3 | $18,300 | $16,200 | $19,800 |
| 4 | $18,300 | $17,700 | $19,500 |
| 5 | $18,300 | $20,400 | $20,300 |
| 6 | $18,300 | $25,400 | $29,600 |
| 7 | $18,300 | $40,300 | |
| 8 | $18,300 | $50,000 | |
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.
- The NPV of press A is $ __ (Round to the nearest cent.)
The NPV of press B is $ __ (Round to the nearest cent.)
The NPV of press C is $ __ (Round to the nearest cent.)
- Based on NPV, Hook Industries should (ACCEPT OR REJECT) __press A. ( CHOOSE FROM THE PARENTHESIS)
Based on NPV, Hook Industries should (ACCEPT OR REJECT)__ press B. ( CHOOSE FROM THE PARENTHESIS)
Based on NPV, Hook Industries should (ACCEPT OR REJECT) __press C ( CHOOSE FROM THE PARENTHESIS)
c.In ranking the presses from best to worst, (PRESS A, PRESS B, PRESS C) __is the number 1 investment. (CHOOSE FROM THE PARENTHESIS)
(PRESS A, PRESS B, PRESS C) __ is the number 2 investment. (CHOOSE FROM THE PARENTHESIS)
(PRESS A, PRESS B, PRESS C) __is the number 3 investment. (CHOOSE FROM THE PARENTHESIS)
d. The PI of press A is__ (Round to two decimal places.)
The PI of press B is__ (Round to two decimal places.)
The PI of press C is__ (Round to two decimal places.)
e.In ranking the presses from best to worst, (PRESS A, PRESS B, PRESS C) __is the number 1 investment. (CHOOSE FROM THE PARENTHESIS)
(PRESS A, PRESS B, PRESS C) __ is the number 2 investment. (CHOOSE FROM THE PARENTHESIS)
(PRESS A, PRESS B, PRESS C) __is the number 3 investment. (CHOOSE FROM THE PARENTHESIS)
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