# Answers and solutions 11 24 11 16 a using a financial

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11-16a.Using a financial calculator, input the following:CF0= -190000,CF1= 87000, Nj= 3, and I = 14 to solve for NPV190-3= \$11,981.99 ≈\$11,982 (for 3 years).Adjusted NPV190-3= \$11,982 + \$11,982/(1.14)3= \$20,070.Using a financial calculator, input the following:CF0= -360000,CF1= 98300, Nj= 6, and I = 14 to solve for NPV360-6= \$22,256.02 ≈\$22,256 (for 6 years).Both new machines have positive NPVs, hence the old machineshould be replaced.Further, since its adjusted NPV is greater,choose Model 360-6.11-17a.NPV of termination after Year t:NPV0= -\$22,500 + \$22,500 = 0.Using a financial calculator, input the following:CF0= -22500, CF1= 23750, and I = 10 to solve for NPV1= -\$909.09 ≈ -\$909.Using a financial calculator, input the following:CF0= -22500, CF1= 6250, CF2= 20250, and I = 10 to solve for NPV2= -\$82.64 ≈ -\$83.Using a financial calculator, input the following:CF0= -22500, CF1= 6250, Nj= 2, CF3= 17250, and I = 10 to solve for NPV3= \$1,307.29≈ \$1,307.Using a financial calculator, input the following:CF0= -22500, CF1= 6250, Nj= 3, CF4= 11250, and I = 10 to solve forNPV4= \$726.73 ≈\$727.Using a financial calculator, input the following:CF0= -22500, CF1= 6250, Nj= 5, and I = 10 to solve for NPV5= \$1,192.42 ≈ \$1,192.The firm should operate the truck for 3 years, NPV3= \$1,307.b. No.Salvage possibilities could only raise NPV and IRR.The valueof the firm is maximized by terminating the project after Year 3.Answers and Solutions:11 - 25
SOLUTION TO SPREADSHEET PROBLEM11-18 The detailed solution for the problem is available both on theinstructor’s resource CD-ROM (in the fileSolution for Ch 11 P18 Builda Model.xls) and on the instructor’s side of the web site,brigham.swcollege.com.Answers and Solutions:11 - 26

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