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

• Notes
• 43
• 100% (3) 3 out of 3 people found this document helpful

This preview shows page 24 - 28 out of 43 pages.

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

Course Hero member to access this document

Course Hero member to access this document

End of preview. Want to read all 43 pages?

Course Hero member to access this document

Term
Spring
Professor
Unknown
Tags
Internal rate of return
• • • 