Fi515 Week 5 Homework

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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 = $4,600,000.
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