Fi515 Week 5 Homework

Ciara Wilson
Homework Week 5
10-8
Truck:
NPV = -$17,100 + $5,100(PVIFA14%,5)
    = -$17,100 + $5,100(3.4331) = -$17,100 + $17,509
    = $409.       (Accept)
Financial calculator:   Input the appropriate cash flows into the cash flow register and then solve for IRR = 14.99% ≈ 15%.
MIRR:   14.54%
Pulley System:
NPV = -$22,430 + $7,500(3.4331) = -$22,430 + $25,748
    = $3,318.       (Accept)
Financial calculator:   Input the appropriate cash flows into the cash flow register and then solve for IRR = 20%.
MIRR:   17.19%.
10-9
Gas:
Year 1: 5000; Year 2: 5000; Year 3: 5000; Year 4: 5000; Year 5: 5000; Year 6: 5000
NPV= -17,500
4464.29
3985.97
3558.90
3177.59
2837.13
2533.16
NPVg= $3057
IRRg= 18%

Electric:
Year 1: 6290 Year 2:6290; Year 3: 6290; Year 4: 6290; Year 5: 6290 Year 6: 6290
NPV= -22,000
5616.07
5014.35
4477.10
3997.41
3569.11
3186.71
NPVe= $3860.75 or $3861
IRRe= 18%
Buy the electric forklift, because of the high NPV

11-2
Operating Cash Flows:   t = 1
Sales revenues                                                   $10,000,000
Operating costs                                                     7,000,000
Depreciation                                                         2,000,000
Operating income before taxes                           $ 1,000,000
Taxes (40%)                                                           - 400,000
Operating income after taxes                             $600,000
Add back depreciation                                         2,000,000
Operating cash flow                                           $   2,600,000

11-3
Equipment's original cost                             $20,000,000
Depreciation (80%)                                         16,000,000
Book value                                                         $ 4,000,000
Gain on sale = $5,000,000 - $4,000,000 = $1,000,000.
Tax on gain = $1,000,000(0.4) = $400,000.
A-T net salvage value = $5,000,000 - $400,000 =... [continues]

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