New Machine - 200,000.

00
Gain on Sale of Old Machine After
18,000.00
Tax
Cost saving in Working Capital 30,000.00
Net Cash Outflow - 152,000.00
#1 INV 1 INV 2
PV FACTOR PV PV FACTOR PV
12,000.00 180,000.00
4% 8.111 97,332.00 0.676 121,680.00
5% 7.722 92,664.00 0.614 110,520.00
6% 7.360 88,320.00 0.558 100,440.00
7% 7.024 84,288.00 0.508 91,440.00
8% 6.710 80,520.00 0.463 83,340.00
9% 6.418 77,016.00 0.422 75,960.00
10% 6.145 73,740.00 0.386 69,480.00
11% 5.889 70,668.00 0.352 63,360.00
12% 5.650 67,800.00 0.322 57,960.00
13% 5.426 65,112.00 0.295 53,100.00
14% 5.216 62,592.00 0.270 48,600.00
15% 5.019 60,228.00 0.247 44,460.00
16% 4.833 57,996.00 0.227 40,860.00
17% 4.659 55,908.00 0.208 37,440.00
18% 4.494 53,928.00 0.191 34,380.00
19% 4.339 52,068.00 0.176 31,680.00
20% 4.192 50,304.00 0.162 29,160.00
21% 4.054 48,648.00 0.149 26,820.00
22% 3.923 47,076.00 0.137 24,660.00
23% 3.799 45,588.00 0.126 22,680.00
24% 3.682 44,184.00 0.116 20,880.00
25% 3.571 42,852.00 0.107 19,260.00
#2
PREFERRED INVESTMENT #3
4% 2 Reject Investment 1 at approximately 21%
5% 2 Reject Investment 2 at approximately 14%
6% 2
7% 2
8% 2
9% 1
10% 1
11% 1
12% 1
13% 1
14% 1
15% 1
16% 1
17% 1
18% 1
19% 1
20% 1
21% 1
22% 1
23% 1
24% 1
25% 1
Supreme Deluxe - 1 2 3 4 5 6
Outflow - 30,000.00
Overhaul - 2,000.00
Operating Costs - 2,400.00 - 2,400.00 - 2,400.00 - 2,400.00 - 2,400.00 - 2,400.00
MV at trade-in time 8,000.00
- 30,000.00
- 2,400.00 - 2,400.00 - 2,400.00 - 4,400.00 - 2,400.00 5,600.00
pv @ 10% 1 0.909 0.826 0.751 0.683 0.621 0.564
-2181.6 -1982.4 -1802.4 -3005.2 -1490.4 3158.4

$ -30,000.00
$ -7,303.60
NPV OF SD $ -37,303.60
Premium Fairmont 1 2 3 4 5 6
Outflow - 20,000.00
Overhaul - 1,000.00 - 1,000.00
Operating Costs - 2,000.00 - 2,000.00 - 2,000.00 - 2,000.00 - 2,000.00 - 2,000.00
MV at trade-in time 8,000.00 8,000.00
- 20,000.00
- 2,000.00 - 3,000.00 6,000.00 - 2,000.00 - 3,000.00 6,000.00
0.909 0.826 0.751 0.683 0.621 0.564
-1818.00 -2478.00 4506.00 -1366.00 -1863.00 3384.00

$ -20,000.00
$ 365.00
NPV OF PF $ -19,635.00

Economy Delight 1 2 3 4 5 6
Outflow - 15,000.00
Overhaul
Operating Costs - 1,500.00 - 1,500.00 - 1,500.00 - 1,500.00 - 1,500.00 - 1,500.00
MV at trade-in time 8,000.00 8,000.00 8,000.00
- 15,000.00
- 1,500.00 6,500.00 - 1,500.00 6,500.00 - 1,500.00 6,500.00
0.909 0.826 0.751 0.683 0.621 0.564
-1363.5 5369 -1126.5 4439.5 -931.5 3666

$ -15,000.00
$ 10,053.00
NPV OF ED $ -4,947.00
ECONOMY DELIGHT IS THE ALTERNATIVE THAT PROMISES GREATEST FINANCIAL DISADVANTAGE.
 NEW MACHINE - 80,000.00
GAIN ON TRADE IN OF OLD MACHINE
1,000.00
NET INVESTMENT - 79,000.00

1 2 3 4 5 6
ADD WORKING CAP - 100,000.00
INC IN EARNINGS 40,000.00 40,000.00 40,000.00 40,000.00 40,000.00 40,000.00
WC RECOVERED 100,000.00
- 100,000.00
40,000.00 40,000.00 40,000.00 40,000.00 40,000.00 140,000.00
PV FACTOR @ 16% 0.862 0.743 0.641 0.552 0.476 0.410
34480 29720 25640 22080 19040 57400
- 100,000.00
188360
NPV 88,360.00
YES, THIS IS A WISE USE OF FUNDS BECAUSE THE NPV IS POSITIVE.
#1
EQUIPMENT 1 1 2 3 4 5
EQUIPMENT - 1,300,000.00
RETURN 400,000.00 400,000.00 400,000.00 400,000.00 400,000.00

PV FACTOR @ 16% 0.862 0.743 0.641 0.552 0.476

344,800.00 297,200.00 256,400.00 220,800.00 190,400.00
- 1,300,000.00
1,309,600.00 THE INVESTMENT IN EQUIPMENT 1 IS MORE ATTRACTIVE BECAUSE IT GIVES
NPV of eq 1 9,600.00 HIGHER NPV THAN THE EQUIPMENT 2
EQUIPMENT 2 1 2 3 4 5
EQUIPMENT - 1,800,000.00
RETURN 550,000.00 550,000.00 550,000.00 550,000.00 550,000.00

PV FACTOR @ 16% 0.862 0.743 0.641 0.552 0.476

474,100.00 408,650.00 352,550.00 303,600.00 261,800.00
- 1,800,000.00
1,800,700.00
NPV of eq 2 700.00
#2
IRR OF EQUIPMENT 1 16%

- 1,300,000.00
1,300,000.00 1,300,000.00 3.25
NPV OF EQUIPMENT 1 -

IRR OF EQUIPMENT 2 16%

- 1,800,000.00
NPV OF EQUIPMENT 2 1,800,000.00 3.272
-
#3

INCREMENTAL
EQUIP1 EQUIP2 INVESTMENT
NET INV - 1,300,000.00 - 1,800,000.00 - 500,000.00
400,000.00 550,000.00 150,000.00