Axis Corp is considering investment in the best of two mutually exclusive projects.

Project Kelvin involves an overhaul

of the existing systems; it will cost $45000 and generate cash inflows of $20,000 per year for the next 3 years. Project
Thompson involves replacement of the existing system; it will cost $275,000, and generate cash inflows of $60,000 per
year for 6 years. Using an 8% cost of capital, calculate each project's NPV, IRR, DPBP and PI, and make a recommendation base
findings.

Year Kelvin CF Thompson CF

0 -45,000 -275000
1 20,000 60,000
2 20,000 60,000
3 20,000 60,000
4 60,000
5 60,000
6 60,000
vin involves an overhaul
he next 3 years. Project
sh inflows of $60,000 per
nd make a recommendation based on your

NPV IRR DPBP PI

Kelvin
Thompson
Axis Corp is considering investment in the best of two mutually exclusive projects. Project Kelvin involves an overhaul
of the existing systems; it will cost $45000 and generate cash inflows of $20,000 per year for the next 3 years. Project
Thompson involves replacement of the existing system; it will cost $275,000, and generate cash inflows of $60,000 per
year for 6 years. Using an 8% cost of capital, calculate each project's NPV, IRR, DPBP and PI, and make a recommendation base
findings.

Year Kelvin CF Thompson CF Discount factor Kelvin DCF Thompson DCF

0 -45,000 -275000 1 -45000 -275000
1 20,000 60,000 0.92592592592593 18518.51851852 55555.5555556
2 20,000 60,000 0.85733882030178 17146.77640604 51440.3292181
3 20,000 60,000 0.79383224102017 15876.6448204 47629.9344612
4 60,000 0.73502985279645 0 44101.7911678
5 60,000 0.68058319703375 0 40834.991822
6 60,000 0.6301696268831 0 37810.177613
vin involves an overhaul
he next 3 years. Project
sh inflows of $60,000 per
nd make a recommendation based on your

Kelvin Cum DCF Thompson Cum DCF NPV IRR DPBP PI

-45000 -275000 Kelvin 6541.9397 16% 2.587952 1.1453764
-26481.481481481 -219444.444444444 Thompson 2372.7798 8.284% 5.93724494 1.0086283
-9334.7050754458 -168004.115226337
6541.93974495757 -120374.180765127
-76272.3895973401
-35437.3977753149
2372.77983767137
Hook industries is considering the replacement of one of its old drill presses. Three alternative replacement presses
are under consideration. The relevant cash flows associated with each are shown in the following table. The firm's
cost of capital is 15%.

Press A Press B Press C

Initial Investment -85000 -60000 -130000
1 18000 12000 50000
2 18000 14000 30000
3 18000 16000 20000
4 18000 18000 20000
5 18000 20000 20000
6 18000 25000 30000
7 18000 40000
8 18000 50000
 replacement presses
ing table. The firm's

NPV IRR DPBP PI

Press A
Press B
Press C
Hook industries is considering the replacement of one of its old drill presses. Three alternative replacement presses
are under consideration. The relevant cash flows associated with each are shown in the following table. The firm's
cost of capital is 15%.

Press A Press B Press C DF Press A Press B Press C

Initial Investment -85000 -60000 -130000 15% -85000 -60000 -130000
1 18000 12000 50000 0.86956522 15652.174 10434.783 43478.261
2 18000 14000 30000 0.75614367 13610.586 10586.011 22684.31
3 18000 16000 20000 0.65751623 11835.292 10520.26 13150.325
4 18000 18000 20000 0.57175325 10291.558 10291.558 11435.065
5 18000 20000 20000 0.49717674 8949.1812 9943.5347 9943.5347
6 18000 25000 30000 0.4323276 7781.8967 10808.19 12969.828
7 18000 40000 0.37593704 6766.8667 0 15037.482
8 18000 50000 0.32690177 5884.2319 0 16345.089
 replacement presses
ing table. The firm's

Press A Press B Press C

-85000 -60000 -130000 NPV IRR DPBP PI
-69347.83 -49565.22 -86521.74 Press A 165771.79 13% 8+ 0.9502563
-55737.24 -38979.21 -63837.43 Press B 122584.34 16% 5.7608909 1.0430723
-43901.95 -28458.95 -50687.1 Press C 275043.89 19% 7.0796077 1.1157223
-33610.39 -18167.39 -39252.04
-24661.21 -8223.853 -29308.5
-16879.31 2584.3367 -16338.68
-10112.44 2584.3367 -1301.195
-4228.213 2584.3367 15043.893
Pound industries is attempting to select the best of three mutually exclusive projects. The initial investment and after tax cash
associated with these projects are shown in the following table. The cost of capital is 15%:

Cash flows Year Project A Project B

Initial Investment 0 -60000 -100000
Cash inflows (t=1 to 5) 1 20000 31500
Cash inflows (t=1 to 5) 2 20000 31500
Cash inflows (t=1 to 5) 3 20000 31500
Cash inflows (t=1 to 5) 4 20000 31500
Cash inflows (t=1 to 5) 5 20000 31500
nitial investment and after tax cash-inflows

Project C DF DCF A DCF B DCF C

-110000 1 -60000 -100000 -110000 Press A
32500 0.8695652 17391.3043 27391.304 28260.87 Press B
32500 0.7561437 15122.8733 23818.526 24574.669 Press C
32500 0.6575162 13150.3246 20711.761 21369.278
32500 0.5717532 11435.0649 18010.227 18581.98
32500 0.4971767 9943.53471 15661.067 16158.244
NPV 7043.10196 5592.8856 -1054.959
IRR 20% 17% 15%
PI 1.11738503 1.0559289 0.9904095
NPV IRR PI
7043.102 20% 1.117385
5592.8856 17% 1.0559289
-1054.959 15% 0.9904095
Projects A and B, of equal risk, are alternatives for expanding Rosa Company's capacity. The firm's cost of
capital is 13%. The cash flows for each project are shown in the following table. Choose between the projects using
all capital budgeting techniques

Project A Project B Year

Initial Investment -80000 -50000 0
15000 15000 1
20000 15000 2
25000 15000 3
30000 15000 4
35000 15000 5
NPV 3659.68359796616 2758.4689
IRR 15% 15%
PI 1.04574604497458 1.0551694
 firm's cost of
ween the projects using
Nicholson Roofing materials Inc is considering two mutually exclusive projects, each with an
initial investment of $150,000. The company’s board of directors has set a maximum 4 year payback
requirement and has set its cost of capital at 9%. Use NPV, DPBP, IRR and PI to decide.

Year Project A Project B

-150000 -150000
1 45000 75000
2 45000 60000
3 45000 30000
4 45000 30000
5 45000 30000
6 45000 30000
NPV 51866.3365603919 51112.361
IRR 20% 23%
PI 1.34577557706928 1.3407491