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Question 1 Net present value: Kingston, Inc., is looking to add a new machine at a cost of $4,432,455. The company expects this equipment will lead...

This question was answered on Jan 11, 2013. View the Answer
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Question 1 Net present value: Kingston, Inc., is looking to add a new machine at a cost of $4,432,455. The company expects this equipment will lead to cash flows of $801,456, $905,489, $919,442, $953,644, $1,207,987, and $1,109,115 over the next six years. If the appropriate discount rate is 15 percent, the NPV of this investment is $ . Question 2 Average accounting rate of return (ARR):  Capitol Corp. is expecting to generate aftertax income of $49,709 over each of the next three years. The average book  value of their equipment over that period will be $230,532. The project’s average accounting rate of return is  %. If the firm’s acceptance decision on any project is  based on an ARR of 37.5 percent, the firm should  the project.  (Round your answer to 2 decimal places for e.g. 12.25%. All intermittent calculations should be rounded to 4 decimal places before carrying to next  calculation.) Question 3 Net present value:  Emporia Mills is evaluating two heating systems. Costs and projected energy savings are given in the following table. The firm uses 11.00  percent to discount such project cash flows. The NPV of System 100 is $ , the NPV of System 200 is $ , and Emporia should choose  . Year System 100 System 200 0 $-2,085,650 $-1,322,938 1 $227,720 $759,975 2 $608,221 $500,596 3 $729,018 $495,926 4 $897,838 $330,319
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8419127.xls

Question 1:
Year
Cash Flows
Disc Rate
PVF
PVCF
NPV 0
(4,432,455)
15%
1.0000
(4,432,455)
(820,976) 1
801,456 2
905,489 3
919,442 4
953,644 5
1,207,987 6
1,109,115 0.8696
696,918 0.7561
684,680...

This question was asked on Jan 10, 2013 and answered on Jan 11, 2013.

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