FM11 20 - 11-17 0 1 2 3 4 5 6 7 8 A: | | | | | | | | | -10...

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Unformatted text preview: 11-17 0 1 2 3 4 5 6 7 8 A: | | | | | | | | | -10 4 4 4 4 4 4 4 4 -10-6Answers and Solutions:11 - 20Machine A's simple NPV is calculated as follows: Enter CF= -10 and CF1-4= 4. Then enter I = 10, and press the NPV key to get NPVA= $2.679 million. However, this does not consider the fact that the project can be repeated again. Enter these values into the cash flow register: CF= -10; CF1-3= 4; CF4= -6; CF5-8= 4. Then enter I = 10, and press the NPV key to get Extended NPVA= $4.5096 $4.51 million. 0 1 2 3 4 5 6 7 8 B:| | | | | | | | | -15 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 Enter these cash flows into the cash flow register, along with the interest rate, and press the NPV key to get NPVB= $3.672 $3.67 million. Machine A is the better project and will increase the company's value by $4.51 million. The EAA of machine A is found by first finding the PV: N = 4, I/YR = 10, PMT = 4, FV = 0; solve for PV = 12.679. The NPV is $12.679 $10 = $2.679 million....
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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