(Related to Checkpoint 11.2) (Calculating EAC) Barry Boswell is a financial analyst for Dossman Metal Works, Inc. and he is analyzing two alternative configurations for the firm's new plasma cutter shop. The two alternatives, denoted A and B below, will perform the same task, but alternative A will cost $95,000 to purchase, while alternative B will cost only $55,000. Moreover, the two alternatives will have very different cash flows and useful lives. The after-tax costs for the two projects are as follows: a. Calculate each project's EAC, given a discount rate of 10 percent. b. Which of the alternatives do you think Barry should select? Why? Data Table a. Alternative A's EAC at a discount rate of 10% is $N. (Round to the n Year Alternative A Alternative B S(55,000) (6,500) (6,500) (6,500) S(95,000) (21,000) (21,000) (21,000) (21,000) (21,000) (21,000) (21,000) (Click on the icon D in order to copy its contents into a spreadsheet.) 1 2 3 4 5

(Related to Checkpoint 11.2) (Calculating EAC) Barry Boswell is a financial analyst for Dossman Metal Works, Inc. and he is analyzing two alternative configurations for the firm's new plasma cutter shop. The two alternatives, denoted A and B below, will perform the same task, but alternative A will cost $95,000 to purchase, while alternative B will cost only $55,000. Moreover, the two alternatives will have very different cash flows and useful lives. The after-tax costs for the two projects are as follows: a. Calculate each project's EAC, given a discount rate of 10 percent. b. Which of the alternatives do you think Barry should select? Why? Data Table a. Alternative A's EAC at a discount rate of 10% is $N. (Round to the n Year Alternative A Alternative B S(55,000) (6,500) (6,500) (6,500) S(95,000) (21,000) (21,000) (21,000) (21,000) (21,000) (21,000) (21,000) (Click on the icon D in order to copy its contents into a spreadsheet.) 1 2 3 4 5

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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Hook Industries is considering the replacement of one of its old metal stamping machines. Three alternative replacement machines are under consideration. The cash flows associated with each are shown in the following table attached: . The firm's cost of capital is 10%. a. Calculate the net present value (NPV) of each press. b. Using NPV, evaluate the acceptability of each press. c. Rank the presses from best to worst using NPV.
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