1.)Orkin Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $489,272, has an expected useful life of 13 years, a salvage value of zero, and is expected to increase net annual cash flows by $68,600. Project B will cost $337,425, has an expected useful life of 13 years, a salvage value of zero, and is expected to increase net annual cash flows by $49,200. A discount rate of 8% is appropriate for both projects. Compute the net present value and profitability index of each project. Which project should be accepted? (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round computations and final answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. Round computations for Discount Factor to 5 decimal places. )
- Net present value - Project A $?
- Profitability index - Project A ?
- Net present value - Project B $ ?
- Profitability index - Project B?
Which project should be accepted A or B ?
2.)Rogler Company is performing a post-audit of a project completed one year ago. The initial estimates were that the project would cost $240,639, would have a useful life of 9 years, zero salvage value, and would result in net annual cash flows of $43,400 per year. Now that the investment has been in operation for 1 year, revised figures indicate that it actually cost $249,774, will have a useful life of 11 years, and will produce net annual cash flows of $36,475 per year. Evaluate the success of the project. Assume a discount rate of 10%.
- Original net present value $?
- Revised net present value $
3.)Lovitz Company is evaluating the purchase of a rebuilt spot-welding machine to be used in the manufacture of a new product. The machine will cost $173,000, has an estimated useful life of 7 years, a salvage value of zero, and will increase net annual cash flows by $34,373. What is its approximate internal rate of return?