Data Section
Cash Inflows
Cash Inflows
Payback Period
Payback Period
Summary
Summary
2nd Proposal
2nd Proposal
hange in Depreciation
IRR Calculations
SUMMARY SECTION
Net Present Value
P.V. of Benefits - P.V. of Costs = Net Present Value
$36,237
30,625
$5,612
The benefits exceed the costs. You should BUY the asset.
Internal Rate of Return
Internal Rate of Return =
20.58%
The IRR of 20.58% is greater than the discount rate (or required rate of return) of 12.0%.
You should BUY the asset.
Modified Internal Rate of Return
Modified Internal Rate of Return =
16.81%
The MIRR of 16.81% is greater than the discount rate (or required rate of return) of 12.0%.
You should BUY the asset.
Payback Period
Payback Period =
You should buy the asset only if the firm's minimum desired
payback period is 2.51 years or greater.
2.51 years
CASH OUTFLOWS
(0)
P.V. OF COSTS =
CASH OUTFLOWS
(0)
P.V. OF COSTS =
(2nd Proposal)
@
12%
CASH INFLOWS
PVF =
PVB
$701,391
(1)
0.893 =
$231,690
4,000
(2)
0.797 =
191,372
6,500
(3)
0.712 =
103,166
(8,000)
(4)
0.636 =
68,776
(11,375)
(5)
0.567 =
59,012
(6)
0.000 =
0
(7)
0.000 =
0
(8)
0.000 =
0
(9)
0.000 =
0
(10)
0.000 =
0
_________
_________
$692,516
P.V. OF BENEFITS =
$654,017
SUMMARY OF FINDINGS
Cash Flow
$259,493
240,057
144,941
108,221
104,000
0
0
0
0
0
($38,499)
9.26%
10.73%
x
x
x
x
x
x
x
x
x
x
x
Profitability Index =
Payback Period (yrs) =
0.94
3.44
Proposal A
CASH OUTFLOWS
(0)
P.V. OF COSTS =
@
$50,000
0
0
(8,000)
(11,375)
12%
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(4)
(8)
(12)
(16)
$30,625
Net Present Value =
CASH INFLOWS
12,157
x
12,530
x
11,542
x
11,296
x
0
x
0
x
0
x
0
x
0
x
0
x
5,612
x
5,612
x
5,612
x
5,612
x
P.V. OF BENEFITS =
0.893
0.797
0.712
0.636
0.000
0.000
0.000
0.000
0.000
0.000
0.636
0.404
0.257
0.163
=
=
=
=
=
=
=
=
=
=
=
=
=
=
$10,855
9,989
8,215
7,179
0
0
0
0
0
0
3,567
2,267
1,441
916
$44,427
$13,802
Proposal B
CASH OUTFLOWS
(0)
P.V. OF COSTS =
@
$701,391
4,000
6,500
(8,000)
(11,375)
$692,516
Net Present Value =
12%
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(5)
(10)
(15)
0
CASH INFLOWS
$259,493
x
240,057
x
144,941
x
108,221
x
104,000
x
0
x
0
x
0
x
0
x
0
x
(38,499) x
(38,499) x
(38,499) x
0
x
P.V. OF BENEFITS =
($79,773)
0.893
0.797
0.712
0.636
0.567
0.000
0.000
0.000
0.000
0.000
0.567
0.322
0.183
0.000
=
=
=
=
=
=
=
=
=
=
=
=
=
=
$231,690
191,372
103,166
68,776
59,012
0
0
0
0
0
(21,845)
(12,396)
(7,034)
0
$612,742
$3,000
$2,000
$1,000
$0
0.00%
5.00%
10.00%
15.00%
($1,000)
($2,000)
($3,000)
($4,000)
Discount Rate
20.00%
25.00%
30.00%
15,000
12,157
12,530
11,542
11,296
10,000
5,000
0
0
(5,000)
(10,000)
(15,000)
(20,000)
(25,000)
(30,000)
(30,625)
(35,000)
1
6
Year
10
11