Part 1: The Financial Performance Analysis

For the first part of your report, you will provide an analysis of the financial performance of both alternatives using net present value (NPV), accounting rate of return (ARR), internal rate of return (IRR), and payback. (Note: ARR is also called Return on Investment, or ROI.)

Analyze each of the alternatives based on your calculations and illustrate to the executive team which alternative should yield the highest return

Air Scrubbers IRR Worksheet Furnace Fuel Change Period Cash Flow Net Present Value using the Annuity Table to determine PV of cash flow (1,950,000) NPV = Initial Cost + (Net Annual Cash Flow x Factor) Factor Present Value Net Present Value using the Annuity IPV = Initial Cost + (Net Annual Cash Flow x Factor) 345,000 Initial investment Amount w S (1,950,000) Factor Present Value (1,950,000) 2 5 PV of Annual net cash flow for 15 years Initial investment 345,000 $ 345,000 9.71225 3,350,726 (1,885,000) (1,885,000) 3 5 345,000 Net present value PV of Annual net cash flow for 15 years 365,000 9.71225 1,400,726 Net present value 3,544,971 345,000 OR 1,659,971 345,000 Net Present Value Using Excel to determine PV cash flow OR 6 5 345,000 NPV = Initial Cost + PV of Cash Flow Net Present Value Using Excel to determine PV cash flow Present Value NPV = Initial Cost + PV of Cash Flow 7 5 345,000 Initial investment (1,950,000 Initial investment Present Value 345,000 |PV of Annual net cash flow for 15 years -PV(rate, value1,[value2] 3,350,726 (1,885,000 Net present value PV of Annual net cash flow for 15 years PV(rate, value1,[value2] 345,000 $ 1,400,726 3,544,971 10 5 Net present value 345,000 $ 165,971 11 $ 345,000 Payback Period = Initial Investment / Net Annual Cash Flow 12 5 345,000 Payback Period = Initial Investment / Net Annual Cash Flow 13 $ 345,000 5.61 $45,00 Internal Rate of Return Using Annuity Table Internal Rate of Return sing Annuity Table OR 17.68% Furnance Fuel Change Using Excel =IRR(M6:M21) use the IRR worksheet OR 15.71% Using Excel =IRR(M26:M41) use the IRR worksheet IRR Worksheet 17.68% Period Cash Flow Average Rate of Return = Ave Net Income / Ave Book Value of investment Average Rate of Return = Ave Net Income / Ave Book Value of investment (1,885,000) 365,000 14.87% 365,000 19.10% 365,000 365,000 365,000 $65,000 365,000 365,000 365,00 $65,000 365,000 12 5 365,000 13 5 365,000 165,000 65,00