NPV and IRR, Mutually Exclusive Projects For discount factors use Exhibit 12B-1 and Exhibit 12B-2. Hunt Inc. intends to invest in one of two competing types of computer-aided manufacturing equipment: CAM X and CAM Y. Both CAM X and CAM Y models have a project life of 10 years. The purchase price of the CAM X model is $3,600,000, and it has a net annual after-tax cash inflow of $900,000. The CAM Y model is more expensive, selling for $4,200,000, but it will produce a net annual after-tax cash inflow of $1,050,000. The cost of capital for the company is 10%. Required: 1. Calculate the NPV for each project. Round present value calculations and your final answers to the nearest dollar. CAM X: $ CAM Y: Which model would you recommend using NPV? 2. Select the IRR for each project. CAM X: CAM Y:
NPV and IRR, Mutually Exclusive Projects For discount factors use Exhibit 12B-1 and Exhibit 12B-2. Hunt Inc. intends to invest in one of two competing types of computer-aided manufacturing equipment: CAM X and CAM Y. Both CAM X and CAM Y models have a project life of 10 years. The purchase price of the CAM X model is $3,600,000, and it has a net annual after-tax cash inflow of $900,000. The CAM Y model is more expensive, selling for $4,200,000, but it will produce a net annual after-tax cash inflow of $1,050,000. The cost of capital for the company is 10%. Required: 1. Calculate the NPV for each project. Round present value calculations and your final answers to the nearest dollar. CAM X: $ CAM Y: Which model would you recommend using NPV? 2. Select the IRR for each project. CAM X: CAM Y:
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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Transcribed Image Text:NPV and IRR, Mutually Exclusive Projects
For discount factors use Exhibit 12B-1 and Exhibit 12B-2.
Hunt Inc. intends to invest in one of two competing types of computer-aided manufacturing equipment: CAM X and CAM Y. Both CAM X and CAM Y models have a project
life of 10 years. The purchase price of the CAM X model is $3,600,000, and it has a net annual after-tax cash inflow of $900,000. The CAM Y model is more expensive,
selling for $4,200,000, but it will produce a net annual after-tax cash inflow of $1,050,000. The cost of capital for the company is 10%.
Required:
1. Calculate the NPV for each project. Round present value calculations and your final answers to the nearest dollar.
САМ Х:
2$
CAM Y:
$
Which model would you recommend using NPV?
2. Select the IRR for each project.
САМ Х:
CAM Y:
Which model would you recommend using IRR?
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