Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9 percent discount rate for their production systems. (Enter negative amounts using negative sign, e.g. -45.25. Round answers to 2 decimal places, e.g. 15.25.) Year System 1 System 2 0 -$12,400 -$43,000 1 12,400 32,600 2 12,400 32,600 3 12,400 32,600 Calculate NPV. NPV of System 1 is $ and NPV of System 2 is $ . Which system should the firm invest? The firm should invest in .system 1 system2
Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9 percent discount rate for their production systems. (Enter negative amounts using negative sign, e.g. -45.25. Round answers to 2 decimal places, e.g. 15.25.) Year System 1 System 2 0 -$12,400 -$43,000 1 12,400 32,600 2 12,400 32,600 3 12,400 32,600 Calculate NPV. NPV of System 1 is $ and NPV of System 2 is $ . Which system should the firm invest? The firm should invest in .system 1 system2
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9 percent discount rate for their production systems. (Enter negative amounts using negative sign, e.g. -45.25. Round answers to 2 decimal places, e.g. 15.25.)
| Year | System 1 | System 2 | |||||
| 0 | -$12,400 | -$43,000 | |||||
| 1 | 12,400 | 32,600 | |||||
| 2 | 12,400 | 32,600 | |||||
| 3 | 12,400 | 32,600 |
Calculate NPV.
| NPV of System 1 is $
|
Which system should the firm invest?
| The firm should invest in
.system 1 system2 |
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