Question

Modern Cleaners is considering offering delivery services. They could either purchase delivery trucks or lease the delivery trucks. They have estimated the cash flows from the two different options as follows. Year Lease Purchase 0 -210,000 -210,000 99,000 25,000 82,000 65,000 61,000 105,000 30,000 130,000 Copyright © by Jarrod Johnston All Rights Reserved. Their discount rate is 12%. Calculate the payback, discounted payback, internal rate of return (IRR), and net present value (NPV) for the two options. Lease Purchase Payback Discounted Payback IRR NPV Payback, discounted payback, and IRR should be rounded to two decimals. NPV should be rounded to the nearest whole number and no commas.

Answer 1

FOFP FQFR FS FT FUFVEWEX EYEZ GA GB GCGDGE Disco unt Facto Year Particular Discount Factor 11% Present Value 2+3 3 Lease Purchase 15% 2 Cash Flow Purchase Lease Cumulative PV Purchase Present Value 2+3 Purchase Lease 3 Lease O Initial Cost S 1 Cash Flows $ 2 Cash Flows $ 3 Cash Flows S 4 Cash Flows $ (210,000) S (210,000) 99,000 S 25,000 82,000 $ 65,000 61,000 $ 105,000 30,000 $ 130,000 1 S (210,000.00) S 0.893 S 88,392.86 S 0.797 $ 65,369.90 $ 0.712 S 43,418.60 S 0.636 $ 19,065.54 S (210,000) 22,321 51,818 74,737 82,617 S 88,392.86 S 153,762.76 S 197,181.35 S 216,246.89 S $ S S 22,321.43 74,139.03 148,875.96 231,493.31 1 S 0.870 S 0.756 S 0.658 S 0.572 S (210,000.00) S 86,086.96 S 62,003.78 S 40.108.49 $ 17,152.60 S (210,000) 21,739 49,149 69,039 74,328 NPV = 6246.89 21493.31 NPV = -4648.18 4255.6 1-A) 2-A) 2-B) Payback period for Lease = = 99000+82000 181000 Bal amount 210000-181000 Bal amount 29000 recover in 29000/61000 0.48 Years Payback period for lease is = 2.48 years Payback period for purchase is = 3.12 years Discounted Payback period for Lease is = (216246.89-210000)/19065.54 3.33years Discounted Payback period for purchase i (231493.31-210000)/82617 3.26 years At the point of IRR NPV = 0 So in case of project if PVF increase to 15% NPV is decrease by SO IRR is 3) 10895.07 S 17.237.71 0.03 * 6246.89 0.03 * 21493.31 10895.07 17237.71 1-b) 13.72 13.72% SO IRR is 15.74% Activate Windows Go to Settings to activate W ... capital bud Investment dec Forord contrac Sheet1 Convertible Bond 4 Derivatives ... +