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The Company is evaluating the purchase of an elaborate hydraulic lift system for all of its locations to use for the boats brought in for repair. The company has narrowed their choices down to two: the B14 Model and the F54 Model. Financial data about the two choices follows. ​ B14 Model F54 Model Investment $340,000 $240,000 Useful life (years) 10 10 Estimated annual net cash inflows for useful life $60,000 $30,000 Residual value $40,000 $13,000 Depreciation method Straight-line Straight-line Required rate of return 12% 12% What is the net present value of the B14 Model? Present Value of $1 Periods 8% 10% 12% 14% 16% 6 0.630 0.564 0.507 0.456 0.410 7 0.583 0.513 0.452 0.400 0.354 8 0.540 0.467 0.404 0.351 0.305 9 0.500 0.424 0.361 0.308 0.263 10 0.463 0.386 0.322 0.270 0.227 Present Value of Annuity of $1 Periods 8% 10% 12% 14% 16% 6 4.623 4.355 4.111 3.889 3.685 7 5.206 4.868 4.564 4.288 4.039 8 5.747 5.335 4.968 4.639 4.344 9 6.247 5.759 5.328 4.946 4.607 10 6.710 6.145 5.650 5.216 4.833 $13,880 negative $351,880 positive $66,314 negative $11,880 positive

The Company is evaluating the purchase of an elaborate hydraulic lift system for all of its locations to use for the boats brought in for repair. The company has narrowed their choices down to two: the B14 Model and the F54 Model. Financial data about the two choices follows. ​ B14 Model F54 Model Investment $340,000 $240,000 Useful life (years) 10 10 Estimated annual net cash inflows for useful life $60,000 $30,000 Residual value $40,000 $13,000 Depreciation method Straight-line Straight-line Required rate of return 12% 12% What is the net present value of the B14 Model? Present Value of $1 Periods 8% 10% 12% 14% 16% 6 0.630 0.564 0.507 0.456 0.410 7 0.583 0.513 0.452 0.400 0.354 8 0.540 0.467 0.404 0.351 0.305 9 0.500 0.424 0.361 0.308 0.263 10 0.463 0.386 0.322 0.270 0.227 Present Value of Annuity of $1 Periods 8% 10% 12% 14% 16% 6 4.623 4.355 4.111 3.889 3.685 7 5.206 4.868 4.564 4.288 4.039 8 5.747 5.335 4.968 4.639 4.344 9 6.247 5.759 5.328 4.946 4.607 10 6.710 6.145 5.650 5.216 4.833 $13,880 negative $351,880 positive $66,314 negative $11,880 positive

Essentials Of Investments
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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  1. The Company is evaluating the purchase of an elaborate hydraulic lift system for all of its locations to use for the boats brought in for repair. The company has narrowed their choices down to two: the B14 Model and the F54 Model. Financial data about the two choices follows. 

    ​ B14 Model F54 Model
    Investment $340,000 $240,000
    Useful life (years) 10 10
    Estimated annual net cash inflows for useful life $60,000 $30,000
    Residual value $40,000 $13,000
    Depreciation method Straight-line Straight-line
    Required rate of return 12% 12%


    What is the net present value of the B14 Model? 

    Present Value of $1

    Periods 8% 10% 12% 14% 16%
    6 0.630 0.564 0.507 0.456 0.410
    7 0.583 0.513 0.452 0.400 0.354
    8 0.540 0.467 0.404 0.351 0.305
    9 0.500 0.424 0.361 0.308 0.263
    10 0.463 0.386 0.322 0.270 0.227

    Present Value of Annuity of $1

    Periods 8% 10% 12% 14% 16%
    6 4.623 4.355 4.111 3.889 3.685
    7 5.206 4.868 4.564 4.288 4.039
    8 5.747 5.335 4.968 4.639 4.344
    9 6.247 5.759 5.328 4.946 4.607
    10 6.710 6.145 5.650 5.216 4.833
       

    $13,880 negative
       

    $351,880 positive
       

    $66,314 negative
       

    $11,880 positive
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