1)A.Proj A.NPV=$2,688.51 IRR=27.81%Payback=3 yearsDiscounted Payback= 4.14 years Proj B.NPV=$5325.53IRR=23.66% Payback=3.21 yearsDiscounted Payback=4.58 years B.2)A.PV of old lease=$44,955.04PV of new lease=$44,354.67B.PMT=$986.653)Cash Flow950095009500950095009500950095009500950011000110001100011000110001100011000110001100011000Initial investmet= $69,133A.Payback period=7.28 YearsB. NPV=$21,654.524)Initial investment I would choose Project B as it provides nearlyAlthough it offers a lower IRR, its NPV is mucYes, he should execpt the new as the its presen
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Installed cost of New AssetAfter Tax Proceeds From Sale of Old AssetChanges in net working capital Incremental Cash FlowsYear 1rev2000(+)exp3000(-)Dep1250EBIT3750(-)Tax Rate1500EAT2250(+)Dep1250CF3500Terminal CFBook value of new machine -Book value of Old machine +Increase in net working capitalNPV=$4399.44CF0=8660,CF1=3500….,CF6=3116+33005 year lifeYear 15)Pre tax CF12000(-)Dep7200EBIT4800(-)Tax Rate1920EAT2880(+)Dep7200CF10080NPV=2,211.13CF0=-36000,CF1=10800 F1=5, I=108 year life Year 1Pre tax CF12000(-)Dep4500EBIT7500(-)Tax Rate3000EAT4500(+)Dep4500CF9000NPV=$12,014.33CF0=-36000,CF1=9000 F1=8, I=10Yes the company should replace the machine as doing so will addfirm, computed via NPV
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