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Homework 25 Solution (1)

# Homework 25 Solution (1) - Homework 25 Solution 8.46 If NPS...

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Homework 25 Solution 8.46 If NPS purchases the trucks, their initial investment is \$30,000 and their net revenues are \$3500 per month. If their nominal MARR is 9% per year (0.75% per month) then their payback period with interest can be calculated as follows: \$30,000 \$3500 P | A,0.75%,n 0 \$30,000 P | A,0.75%,n 8.5714 \$3500 Looking through the 0.75% table at the back of the book, we find that (P|A,0.75%,9) > 8.5714, so the payback period is 9 months. If NPS leases the trucks, their investment is \$10,000 at the beginning of each year and their net revenues are \$2000 per month. Assuming their payback period is less than one year, it can be found as follows: \$10,000 \$2000 P | A,0.75%,n 0 \$10,000 P | A,0.75%,n 5.0000 \$2000 Looking through the 0.75% table at the back of the book, we find that (P|A,0.75%,6) > 5.0000, so the payback period is 6 months. 8.47 To calculate the no-return payback period, we simply sum the cash flows until they become positive: Month 0: –\$15,000 Month 1: –\$15,000 – \$2000 = –\$17,000 Month 2: –\$17,000 – \$2000 = –\$19,000 Month 3: –\$19,000 + \$1000 = –\$18,000 Month 4: –\$18,000 + \$1000 = –\$17,000 Month 5: –\$17,000 + \$6000 = –\$11,000 Month 6: –\$11,000 + \$6000 = –\$ 5,000 Month 7: –\$ 5,000 + \$6000 = +\$ 1,000 So it takes nearly 7 months to recoup his initial investment.

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