Question 3
Question 4
venu industries **should not** invest in the equipment.
Requirement 2. Venu could refurbish the equipment at the end of six years for $101,000. The refurbished equipment could be used one more year, providing -
$77,000 of net cash inflows in year 7. Additionally, the refurbished equipment would have a $53,000 residual value at the end of year 7. Should Venu invest in the
equipment and refurbish it after six years? (Hint: In addition to your answer to Requirement 1, discount the additional cash outflow and inflows back to the
present value.)
Calculate the NPV of the refurbishment. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for cash outflows and for a
negative net present value.)
Question 5
Cash
(outflow)/inflow
PV Factor (i =
14%)
Present Value
Refurbishment at the end of Year 6 (n = 6)
Cash inflows in Year 7 (n = 7)
Question 6
Residual value (n = 7)
elp
Reference
Data table
Year 1 $
261,000
Year 2
253,000
Year 3
227,000
X
Year 4
210,000
Year 5
200,000
Year 6
173,000
Present Value of $1
Periods
1% 2% 3%
4% 5% 6%
7% 8% 9% 10% 12% 14% 15% 16% 18% 20%
0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0.847 0.833
Period 2
Print
Done
Period 1
Period 3
0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.797 0.769 0.756 0.743 0.718 0.694
0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.712 0.675 0.658 0.641 0.609 0.579
Period 4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735
Period 5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681
Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630
Period 7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583
0.708 0.683 0.636 0.592 0.572 0.552 0.516 0.482
0.650 0.621 0.567 0.519 0.497 0.476 0.437 0.402
0.596 0.564 0.507 0.456 0.432 0.410 0.370 0.335
0.547 0.513 0.452 0400 0.376 0.354 0314 0.279
