Business, 24.10.2021 14:00 emmanuellugo40

4| Hook Industries is considering the replacement of one of its old drill presses. Three alternative replacement presses are under consideration. The relevant cash flows associated with each are shown in the following table. The firm’s weighted average cost of capital is 15%. Initial investment (CF0) $85,000 $60,000
Year (t) Cash inflows (CFt)
1 $18,000 $12,000
2 18,000 14,000
3 18,000 16,000
4 18,000 18,000
5 18,000 20,000
6 20,000 25,000
7 16,000 — 40,000
8 -15,000 — 50,000

Required
a. Calculate the net present value (NPV) and profitability index of each press.
b. Using NPV, evaluate the acceptability of each press. Assume: the presses are mutually exclusive

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4| Hook Industries is considering the replacement of one of its old drill presses. Three alternative...

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