Chapter 10Problems 1-36

Input boxes in tanOutput boxes in yellowGiven data in blueCalculations in redAnswers in green

NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-In" be installed in Excel.To install these, click on the Office button then "Excel Options," "Add-Ins" and select"Go." Check "Analyis ToolPak" and "Solver Add-In," then click "OK."

NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-In" be installed in Excel.

Chapter 10Question 1

Input area:

Purchase price $ 6,000,000 Appraised value $ 6,400,000 Cost to build $ 14,200,000 Grading costs $ 890,000

Output area:

The acquisition cost is a sunk cost. The appraisal value is an opportunity cost and should be included. The cost to build and grading costs are investments in fixed assets and are included.

Total initial cost $ 21,490,000

Chapter 10Question 2

Input area:

Camper quantity 19,000 Camper price $ 13,000 Increased motor home quantity 4,500 Motor home price $ 53,000 Lost motor coach quantity 900 Motor coach price $ 91,000

Output area:

Camper sales $ 247,000,000 Increased motor home sales 238,500,000 Lost motor coach sales (81,900,000)Total sales $ 403,600,000

Chapter 10Question 3

Input area:

Projected sales $ 830,000 Variable cost (% of sales) 60%Fixed cost $ 181,000 Depreciation $ 77,000 Tax rate 35%

Output area:

Sales $ 830,000 Variable costs 498,000 Fixed costs 181,000 Depreciation 77,000 EBT $ 74,000 Taxes (35%) 25,900 Net Income $ 48,100

Chapter 10Question 4

Input area:

Sales $ 824,500 Variable cost $ 538,900 Depreciation $ 126,500 Tax rate 34%

Output area:

Sales $ 824,500 Variable costs 538,900 Depreciation 126,500 EBT $ 159,100 Taxes (34%) 54,094 Net Income $ 105,006

OCF $ 231,506 Depreciation tax shield $ 43,010

Chapter 10Question 5

Input area:

Projected sales $ 108,000 Costs $ 51,000 Depreciation $ 6,800 Tax rate 35%

Output area:

Sales $ 108,000 Variable costs 51,000 Depreciation 6,800 EBT $ 50,200 Taxes (35%) 17,570 Net Income $ 32,630

OCF $ 39,430 OCF $ 39,430 OCF $ 39,430 OCF $ 39,430

Chapter 10Question 6

Input area:

Costs $ 1,080,000 *7-year property under MACRS

Output area:

Yr. Beginning Book Value MACRS Depreciation1 $ 1,080,000.00 0.1429 $ 154,332.00 2 925,668.00 0.2449 264,492.00 3 661,176.00 0.1749 188,892.00 4 472,284.00 0.1249 134,892.00 5 337,392.00 0.0893 96,444.00 6 240,948.00 0.0892 96,336.00 7 144,612.00 0.0893 96,444.00 8 48,168.00 0.0446 48,168.00

Ending Book value $ 925,668.00 661,176.00 472,284.00 337,392.00 240,948.00 144,612.00 48,168.00 -

Chapter 10Question 7

Input area:

Costs $ 548,000 Pretax salvage value $ 105,000 Tax rate 35%*Depreciation straight line 8 *Asset used in years 5

Output area:

Annual depreciation $ 68,500 Accumulated depreciation $ 342,500 Book value $ 205,500

Aftertax cash flow $140,175

Chapter 10Question 8

Input area:

Acquisition costs $ 7,900,000 Pretax salvage value $ 1,400,000 Tax rate 35%*MACRS class for taxes 0.2000

0.3200 0.1920 0.1152

Output area:

Book Value $ 1,365,120

Aftertax cash flow $ 1,387,792

Chapter 10Question 9

Input area:

Asset investment $ 3,900,000 Estimated annual sales $ 2,650,000 Costs $ 840,000 Tax rate 35%*Depreciation straight-lineto zero over tax life 3

Output area:

OCF $ 1,631,500

Chapter 10Question 10

Input area:

Asset investment $ 3,900,000 Estimated annual sales $ 2,650,000 Costs $ 840,000 Tax rate 35%*Depreciation straight-lineto zero over tax life 3 OCF $ 1,631,500 Required return 12%

Output area:

NPV $ 18,587.71

Chapter 10Question 11

Input area:

Asset investment $ 3,900,000 Estimated annual sales $ 2,650,000 Costs $ 840,000 Tax rate 35%Required return 12%*Depreciation straight-lineto zero over tax life 3 OCF $ 1,631,500 Initial investment in NWC $ 300,000 Fixed asset value at end $ 210,000

Output area:

Year Cash flow0 $ (4,200,000)1 $ 1,631,500 2 $ 1,631,500 3 $ 2,068,000

NPV $ 29,279.79

Chapter 10Question 12

Input area:

Asset investment $ 3,900,000 Estimated annual sales $ 2,650,000 Costs $ 840,000 Tax rate 35%Required return 12%Initial investment in NWC $ 300,000 Fixed asset value at end $ 210,000 *3 yr MACRS 0.3333

0.44450.1481

Output area:

Year Depreciation Cash flow0 $ (4,200,000.00)1 $ 1,299,870.00 $ 1,631,454.50 2 $ 1,733,550.00 $ 1,783,242.50 3 $ 577,590.00 $ 1,916,303.00

Book value $ 288,990

Aftertax salvage value $ 237,647

NPV $ 42,232.43

Chapter 10Question 13

Input area:

Installation cost $ 560,000 Operating cost per year $ 165,000 Initial NWC $ 29,000 Pretax salvage value $ 85,000 Tax rate 34%Discount rate 10%*Depreciation straight-lineover life 5

Output area:

Annual depreciation charge $ 112,000 Aftertax salvage value $ 56,100 OCF $ 146,980

NPV $ 21,010.24

Chapter 10Question 14

Input area:

Initial investment $ 720,000 Pretax salvage value $ 75,000 Cost savings per year $ 260,000 Working capital reduction $ (110,000)Tax rate 35%*Depreciation straight-lineover life 5

Output area:

Annual depreciation charge $ 144,000 Aftertax salvage value $ 48,750 OCF $ 219,400

Year Cash flow 0 $ (610,000)1 $ 219,400 2 $ 219,400 3 $ 219,400 4 $ 219,400 5 $ 158,150

IRR 21.65%

Chapter 10Question 15

Input area:

Initial investment $ 720,000 Pretax salvage value $ 75,000 Cost savings per year $ 300,000 Cost savings per year $ 240,000 Working capital reduction $ (110,000)Annual depreciation charge $ 144,000 Aftertax salvage value $ 48,750 Tax rate 35%Required return 20%*Depreciation straight-lineover life 5

Output area:

$ 300,000 cost savings $ 240,000 cost savingsYear Cash flow Year Cash flow

0 $ (610,000) 0 $ (610,000)1 245,400 1 206,400 2 245,400 2 206,400 3 245,400 3 206,400 4 245,400 4 206,400 5 184,150 5 145,150

NPV $ 99,281.22 $ (17,352.66)Accept/Reject Accept Reject

Required pretax cost savings:NPV w/o OCF ($634,615.00)Required OCF $212,202.38 OCF less dep. tax shield $161,802.38

Cost savings $ 248,926.73

Chapter 10Question 16

Input area:

Initial fixed asset investment $ 270,000 Initial NWC investment $ 25,000 Annual OCF $ (42,000)Required return 11%*Depreciation staight-lineover life 5

Output area:

NPV $ (435,391.39)

EAC $ (117,803.98)

Chapter 10Question 17

Input area:

Techron I :Cost $ 290,000 Operating costs per year $ 67,000 Life 3Techron II :Cost $ 510,000 Operating costs per year $ 35,000 Life 5Both:Salvage value $ 40,000 Tax rate 35%Discount rate 10%*Depreciation straight-line

Output area:

Both cases:Aftertax salvage value $ 26,000.00 Techron I:OCF $ (9,716.67)NPV $ (294,629.73)EAC $ (118,474.97)Techron II:OCF $ 12,950.00 NPV $ (444,765.36)EAC $ (117,327.98)

The two milling machines have unequal lives, so they can only be compared by expressing both on an equivalent annual basis which is what the EAC method does.Thus, you prefer the Techron II because it has the lower(less negative) annual cost.

Chapter 10Question 18

Input area:

Quantity 185,000 Installation costs $ 940,000 Pretax salvage value $ 70,000 Fixed costs $ 305,000 Variable production cost per carton $ 9.25 Net working capital $ 75,000 Tax rate 35%Required return 12%*Depreciation staight-lineover life 5

Output area:

Aftertax salvage value $ 45,500.00 Depreciation tax shield $ 65,800.00 Initial cash outlay $ (1,015,000.00)NPV w/o OCF $ (946,625.06)Necessary OCF $ 262,603.01 OCF net of dep. tax shield $ 196,803.01

Bid price $ 12.54

Chapter 10Question 19

Input area:

Machine cost $ 560,000 Annual pretax cost $ 210,000 Salvage value $ 80,000 Inventory cost $ 20,000 Inventory cost per year $ 3,000 Tax rate 35%Discount rate 9%MACRS five year class 0.2000

0.32000.19200.1152

Output area:

Year Depreciation1 $ 112,000 2 $ 179,200 3 $ 107,520 4 $ 64,512

Book value $ 96,768.00 Aftertax salvage value $ 85,868.80

Year Cash flow0 $ (580,000.00)1 $ 172,700.00 2 $ 196,220.00 3 $ 171,132.00 4 $ 273,948.00

NPV $ 69,811.79

Chapter 10Question 20

Input area:

System A:Cost $ 430,000 Pretax annual operating cost $ 110,000 Life 4 System B:Cost $ 570,000 Pretax annual operating cost $ 98,000 Life 6 Both:Tax rate 34%Discount rate 11%*Depreciation staight-line

Output area:

System A:OCF $ (36,050)NPV $ (541,843.17)System B:OCF $ (32,380)NPV $ (706,984.82)

If the system will not be replaced when it wearsout, then System Ashould be chosen, because it has the morepositive NPV.

Chapter 10Question 21

Input area:

System A:NPV $ (541,843.17)Operating life 4 System B:NPV $ (706,984.82)Operating life 6

Discount rate 11%

Output area:

System A:EAC $ (174,650.33)System B:EAC $ (167,114.64)

If the system is replaced, System Bshould be chosen because it has the lower EAC.

Chapter 10Question 22

Input area:

Quantity 100,000,000 Initial land cost $ 2,400,000 Land opportunity cost $ 2,700,000 Land value in 5 years $ 3,200,000 Machine cost $ 4,100,000 Pretax salvage value $ 540,000 Fixed costs $ 950,000 Variable cost $ 0.005 Initial NWC $ 600,000 Additional NWC/year $ 50,000 Tax rate 34%Required return 12%*Depreciation staight-lineover life 5

Output area:

Aftertax salvage value $ 356,400.00 Depreciation tax shield $ 278,800.00 Initial cash outlay $ (7,400,000.00)NPV w/o OCF $ (5,079,929.11)Necessary OCF $ 1,409,221.77 OCF net of dep. tax shield $ 1,130,421.77

Bid price $ 0.03163

Chapter 10Question 23

Output area:

At a given price, taking accelerated depreciation compared to straight-linedepreciation causes the NPV to be higher; similarly at a given price, lower net working capital investment requirements will cause the NPV to be higher. Thus,NPV would be zero at a lower price in this situation. In the case of a bid price, you could submit a lower price and still breakeven, or submit the higher priceand make a positive NPV.

At a given price, taking accelerated depreciation compared to straight-linedepreciation causes the NPV to be higher; similarly at a given price, lower net working capital investment requirements will cause the NPV to be higher. Thus,NPV would be zero at a lower price in this situation. In the case of a bid price, you could submit a lower price and still breakeven, or submit the higher price

Chapter 10Question 24

Input area:

Machine A:Cost $ 2,900,000 Variable costs 35%Fixed costs $ 170,000 Life 6 Machine B:Cost $ 5,100,000 Variable costs 30%Fixed costs $ 130,000 Life 9 Both:Sales $ 10,000,000 Tax rate 35%Discount rate 10%*Depreciation staight-line

Output area:

Machine A Machine BVariable costs $ (3,500,000) $ (3,000,000)Fixed costs (170,000) (130,000)Depreciation (483,333) (566,667)EBT $ (4,153,333) $ (3,696,667)Tax 1,453,667 1,293,833 Net income $ (2,699,667) $ (2,402,833)+ Dep 483,333 566,667 OCF $ (2,216,333) $ (1,836,167)

NPV $ (12,552,709.46) $ (15,674,527.56)EAC ($2,882,194.74) ($2,721,733.42)

System B should be chosen since it has the lower EAC.

Chapter 10Question 25

Input area:

Hours used per year 500 Cost per kilowatt $ 0.101 Return 10%

Traditional bulb CFLCost $ 0.50 $ 3.50 Watts 60 15 Lifetime hours 1,000 12,000

Output area:

Kilowatts used per hour 0.06 0.015Kilowatt hours per year 30 7.50Cost per year $ 3.0300 $ 0.7575 Expected life 2 24.00

NPV $ (5.76) $ (10.31)EAC $ (3.3181) $ (1.1470)

Chapter 10Question 26

Input area:

Hours used per year 500 Cost per kilowatt $ 0.101 Return 10%

Traditional bulb CFLCost $ 0.50 $ 3.50 Watts 60 15 Lifetime hours 1,000 12,000

Output area:

Kilowatts used per hour 0.060 0.015 Kilowatt hours per year 30.00 7.50 Cost per year $ 3.0300 $ 0.7575 Expected life 2.00 24.00

Breakeven kilowatt/hr cost $ 0.004509

Chapter 10Question 27

Input area:

Hours used per year 500 Cost per kilowatt $ 0.101 Return 10%

Traditional bulb CFLCost $ 0.50 $ 3.50 Watts 60 15 Lifetime hours 500 12,000

Output area:

Kilowatts used per hour 0.060 0.015 Kilowatt hours per year 30.00 7.50 Cost per year $ 3.0300 $ 0.7575 Expected life 1.00 24.00

Breakeven kilowatt/hr cost $ (0.007131)

Chapter 10Question 29

Input area:

Car mpg 25 Truck mpg 10 New car mpg 40 New truck mpg 12.5 Gas price $ 3.70 Miles per year 12,000

Output area:

Gallons used per year Current car 480.00 New car 300.00 Current truck 1,200.00 New truck 960.00

Gallons saved New car 180.00 New truck 240.00

Chapter 10Question 31

Input area:

Original cost of land $ 1,400,000 Current land value $ 1,500,000 Land value in 4 years $ 1,600,000 Marketing study $ 125,000 Year 1 sales 3,200 Year 2 sales 4,300 Year 3 sales 3,900 Year 4 sales 2,800 Sales price $ 780 Fixed costs $ 425,000 Variable costs 15%Equipment costs $ 4,200,000 Pretax salvage value $ 400,000 Net working capital $ 125,000 Tax rate 38%Required return 13%Year 1 depreciation 33.33%Year 2 depreciation 44.45%Year 3 depreciation 14.81%Year 4 depreciation 7.41%

Output area:

Aftertax salvage valueSale price $ 400,000 Taxes (152,000)Total $ 248,000

Year 0 Year 1 Year 2 Year 3 Year 4Revenues $ 2,496,000 $ 3,354,000 $ 3,042,000 $ 2,184,000 Fixed costs 425,000 425,000 425,000 425,000 Variable costs 374,400 503,100 456,300 327,600 Depreciation 1,399,860 1,866,900 622,020 311,220 EBT $ 296,740 $ 559,000 $ 1,538,680 $ 1,120,180 Taxes 112,761 212,420 584,698 425,668 Net income $ 183,979 $ 346,580 $ 953,982 $ 694,512 OCF $ 1,583,839 $ 2,213,480 $ 1,576,002 $ 1,005,732

Capital spending $ (4,200,000) $ 248,000 Land (1,500,000) 1,600,000 Net working capital (125,000) 125,000

Total cash flow $ (5,825,000.00) $ 1,583,839 $ 2,213,480 $ 1,576,002 $ 2,978,732

NPV $ 229,266.82

Chapter 10Question 32

Input area:

Year 1 unit sales 93,000 Year 2 unit sales 105,000 Year 3 unit sales 128,000 Year 4 unit sales 134,000 Year 5 unit sales 87,000 Initial NWC $ 1,800,000 Additional NWC/year 15%Fixed costs $ 1,200,000 Variable cost per unit $ 265 Unit price $ 380 Equipment cost $ 24,000,000 Salvage value (% of price) 20%Tax rate 35%Required return 18%MACRS depreciation 14.29%

24.49%17.49%12.49%

8.93%

Output area:

Year 0 1Ending book value $ 20,570,400

Sales $ 35,340,000 Variable costs 24,645,000 Fixed costs 1,200,000 Depreciation 3,429,600 EBIT $ 6,065,400 Taxes 2,122,890 Net income $ 3,942,510

Depreciation 3,429,600 Operating cash flow $ 7,372,110

Net cash flowsOperating cash flow $ - $ 7,372,110 Change in NWC (1,800,000) (684,000)Capital spending (24,000,000) - Total cash flow $ (25,800,000) $ 6,688,110

Net present value $ 3,851,952.23 Internal rate of return 23.62%

2 3 4 5 $ 14,692,800 $ 10,495,200 $ 7,497,600 $ 5,354,400

$ 39,900,000 $ 48,640,000 $ 50,920,000 $ 33,060,000 27,825,000 33,920,000 35,510,000 23,055,000 1,200,000 1,200,000 1,200,000 1,200,000 5,877,600 4,197,600 2,997,600 2,143,200 $ 4,997,400 $ 9,322,400 $ 11,212,400 $ 6,661,800 1,749,090 3,262,840 3,924,340 2,331,630 $ 3,248,310 $ 6,059,560 $ 7,288,060 $ 4,330,170

5,877,600 4,197,600 2,997,600 2,143,200 $ 9,125,910 $ 10,257,160 $ 10,285,660 $ 6,473,370

$ 9,125,910 $ 10,257,160 $ 10,285,660 $ 6,473,370 (1,311,000) (342,000) 2,679,000 1,458,000 - - - 4,994,040 $ 7,814,910 $ 9,915,160 $ 12,964,660 $ 12,925,410

Chapter 10Question 33

Input area:

Installed cost $ 610,000 Salvage value $ 40,000 Initial NWC $ 55,000 Tax rate 35%Required return 12%MACRS 33.33%

44.45%14.81%

7.41%

Output area:

Aftertax salvage value $ 26,000.00

Year 1 depreciation $ 203,313.00 Year 2 depreciation $ 271,145.00 Year 3 depreciation $ 90,341.00 Year 4 depreciation $ 45,201.00

Year 1 depreciation CF $ 71,159.55 Year 2 depreciation CF $ 94,900.75 Year 3 depreciation CF $ 31,619.35 Year 4 depreciation CF $ 15,820.35 Initial cash outlay $ (665,000.00)NPV net of OCF $ (447,288.67)

Pretax cost savings $ 190,895.74

Chapter 10Question 34

Input area:

Quantity 185,000 Installation costs $ 940,000 Pretax salvage value $ 70,000 Fixed costs $ 305,000 Variable production cost per carton $ 9.25 Net working capital $ 75,000 Tax rate 35%Required return 12%*Depreciation straight-lineover life 5Price per carton $ 13.00

Output area:

Aftertax salvage value $ 45,500

a. Year 0 1Sales $ 2,405,000 Variable costs 1,711,250 Fixed costs 305,000 Depreciation 188,000 EBIT 200,750 Taxes 70,263 Net income 130,488 Depreciation 188,000 Operating cash flow $ 318,488

Net cash flowsOperating cash flow $ - $ 318,488 Change in NWC (75,000) - Capital spending (940,000) - Total cash flow $ (1,015,000) $ 318,488

Net present value $ 201,451.10

b. NPV w/o OCF $ (946,625.06)Necessary OCF $ 262,603.01 Breakeven quantity 162,073

Year 0 1Sales $ 2,106,949 Variable costs 1,499,176 Fixed costs 305,000 Depreciation 188,000 EBIT 114,774 Taxes 40,171 Net income 74,603 Depreciation 188,000 Operating cash flow $ 262,603

Net cash flowsOperating cash flow $ - $ 262,603 Change in NWC (75,000) - Capital spending (940,000) - Total cash flow $ (1,015,000) $ 262,603

Net present value $ -

c. NPV w/o OCF $ (946,625.06)Necessary OCF $ 262,603.01 Breakeven fixed costs $ 390,976.15

Year 0 1Sales $ 2,405,000 Variable costs 1,711,250 Fixed costs 390,976 Depreciation 188,000 EBIT 114,774 Taxes 40,171 Net income 74,603 Depreciation 188,000 Operating cash flow $ 262,603

Net cash flowsOperating cash flow $ - $ 262,603 Change in NWC (75,000) - Capital spending (940,000) - Total cash flow $ (1,015,000) $ 262,603

Net present value $ -

2 3 4 5 $ 2,405,000 $ 2,405,000 $ 2,405,000 $ 2,405,000 1,711,250 1,711,250 1,711,250 1,711,250 305,000 305,000 305,000 305,000 188,000 188,000 188,000 188,000 200,750 200,750 200,750 200,750 70,263 70,263 70,263 70,263 130,488 130,488 130,488 130,488 188,000 188,000 188,000 188,000 $ 318,488 $ 318,488 $ 318,488 $ 318,488

$ 318,488 $ 318,488 $ 318,488 $ 318,488 - - - 75,000 - - - 45,500 $ 318,488 $ 318,488 $ 318,488 $ 438,988

2 3 4 5 $ 2,106,949 $ 2,106,949 $ 2,106,949 $ 2,106,949 1,499,176 1,499,176 1,499,176 1,499,176 305,000 305,000 305,000 305,000 188,000 188,000 188,000 188,000 114,774 114,774 114,774 114,774 40,171 40,171 40,171 40,171 74,603 74,603 74,603 74,603 188,000 188,000 188,000 188,000 $ 262,603 $ 262,603 $ 262,603 $ 262,603

$ 262,603 $ 262,603 $ 262,603 $ 262,603 - - - 75,000 - - - 45,500 $ 262,603 $ 262,603 $ 262,603 $ 383,103

2 3 4 5 $ 2,405,000 $ 2,405,000 $ 2,405,000 $ 2,405,000 1,711,250 1,711,250 1,711,250 1,711,250 390,976 390,976 390,976 390,976 188,000 188,000 188,000 188,000 114,774 114,774 114,774 114,774 40,171 40,171 40,171 40,171 74,603 74,603 74,603 74,603 188,000 188,000 188,000 188,000 $ 262,603 $ 262,603 $ 262,603 $ 262,603

$ 262,603 $ 262,603 $ 262,603 $ 262,603 - - - 75,000 - - - 45,500 $ 262,603 $ 262,603 $ 262,603 $ 383,103

Chapter 10Question 35

Input area:

Contract quantity 17,500 Equipment $ 3,400,000 Net working capital $ 95,000 Salvage value $ 275,000 Fixed costs $ 600,000 Variable costs/unit $ 175 Mkt. sales in Year 1 3,000 Mkt. sales in Year 2 6,000 Mkt. sales in Year 3 8,000 Mkt. sales in Year 4 5,000 Market price $ 285 Tax rate 40%Required return 13%Project NPV $ 100,000

Output area:

Market sales 1 2 3 4Sales $ 855,000 $ 1,710,000 $ 2,280,000 $ 1,425,000 Variable costs 525,000 1,050,000 1,400,000 875,000 EBT $ 330,000 $ 660,000 $ 880,000 $ 550,000

Tax 132,000 264,000 352,000 220,000 Net income (and OCF) $ 198,000 $ 396,000 $ 528,000 $ 330,000

NPV of market sales $ 1,053,672.99 Initial investment $ 3,495,000 Aftertax salvage value $ 165,000

NPV of OCF $ 2,381,864.14 OCF $ 800,768.90

Bid price $ 253.17

Chapter 10Question 36

Input Area:

Old cost $ 650,000 New machine cost $ 780,000 Life of machine 5 Salvage value $ 150,000 Old machine depreciation $ 130,000 Old machine life left 3 MV old machine $ 210,000 Old machine value in 2 yrs $ 60,000 Saved operating costs $ 145,000 Discount rate 12%Tax rate 38%

Output Area:

a. New computer:Year 0 1Ending book value $ 780,000 $ 624,000

Cost savings $ 89,900 Depreciation $ 59,280 Operating CF $ 149,180

Change in NWC 0 0Capital spending $ (780,000) 0Total cash flow $ (780,000) $ 149,180

Net present value $ (189,468.79)EAC $ (52,560.49)

Old Computer:Year 0 1Ending book value $ 260,000

Depreciation tax shield $ 49,400 Change in NWC 0 0Capital spending $ (377,200) 0Total cash flow $ (377,200) $49,400

Net present value $ (224,674.49)EAC $ (132,939.47)

b. Difference:New computer $ (780,000) $ 149,180 Old computer $ 377,200 ($49,400)Total cash flow $ (402,800) $ 99,780

NPV $ 35,205.70

2 3 4 5 $ 468,000 $ 312,000 $ 156,000 $ -

$ 89,900 $ 89,900 $ 89,900 $ 89,900 $ 59,280 $ 59,280 $ 59,280 $ 59,280 $ 149,180 $ 149,180 $ 149,180 $ 149,180

0 0 0 00 0 0 $ 93,000

$ 149,180 $ 149,180 $ 149,180 $ 242,180

2 3 4 5 $ 130,000

$ 49,400 0

$ 86,600 $ 136,000

$ 149,180 $ 149,180 $ 149,180 $ 242,180 $ (136,000) $ - $ - $ - $ 13,180 $ 149,180 $ 149,180 $ 242,180