Option 1 | Fleet of City Vans | ||||||||||
Period | Particulars | Inflow / Outflow | Amount | PVF @ 10% | Present Value | ||||||
0 | Cost of Vans | Outflow | ($720,000.00) | 1 | ($720,000.00) | ||||||
0 | Initial working capital | Outflow | ($41,000.00) | 1 | ($41,000.00) | ||||||
1 | Additional Cash Inflow | Inflow | $260,000.00 | 0.909 | $236,340.00 | ||||||
2 | Additional Cash Inflow | Inflow | $260,000.00 | 0.826 | $214,760.00 | ||||||
3 | Additional Cash Inflow | Inflow | $260,000.00 | 0.751 | $195,260.00 | ||||||
4 | Additional Cash Inflow | Inflow | $260,000.00 | 0.683 | $177,580.00 | ||||||
4 | Release of Working Capital | Inflow | $41,000.00 | 0.683 | $28,003.00 | ||||||
4 | Salvage Value of Vans | Inflow | $99,000.00 | 0.683 | $67,617.00 | ||||||
Net Present Value | $158,560.00 | ||||||||||
PV Index | = | Net Present Value + Initial Capital Outflow | $158560+$720,000+$41,000 | 1.21 | |||||||
Initial Capital Outflow | $720,000+$41,000 | ||||||||||
Note: | The effect of tax on cash flows has been ignored, due to absence of tax rate. Alternatively, a tax rate of 25% can be assumed, which will therefore impact all the inflows | ||||||||||
Option 2 | Large Trucks | ||||||||||
Period | Particulars | Inflow / Outflow | Amount | PVF @ 10% | Present Value | ||||||
0 | Cost of Trucks | Outflow | ($800,000.00) | 1 | ($800,000.00) | ||||||
0 | Initial Training costs | Outflow | ($12,000.00) | 1 | ($12,000.00) | ||||||
1 | Additional Cash Inflow | Inflow | $153,000.00 | 0.909 | $139,077.00 | ||||||
2 | Additional Cash Inflow | Inflow | $311,000.00 | 0.826 | $256,886.00 | ||||||
3 | Additional Cash Inflow | Inflow | $409,000.00 | 0.751 | $307,159.00 | ||||||
4 | Additional Cash Inflow | Inflow | $441,000.00 | 0.683 | $301,203.00 | ||||||
4 | Salvage Value of Trucks | Inflow | $71,000.00 | 0.683 | $48,493.00 | ||||||
Net Present Value | $240,818.00 | ||||||||||
PV Index | = | Net Present Value + Initial Capital Outflow | $240818+$800,000+$12,000 | 1.30 | |||||||
Initial Capital Outflow | $800,000+$12,000 | ||||||||||
Note: | The effect of tax on cash flows has been ignored, due to absence of tax rate. Alternatively, a tax rate of 25% can be assumed, which will therefore impact all the inflows |
Problem 10-16A (Algo) Using present value techniques to evaluate alternative investment opportunities LO 10-2 Stuart Delivery...
i Problem 10-16A Using present value techniques to evaluate alternative investment opportunities Swift Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Swift Delivery recently acquired approximately $4 million of cash capital from its owners, and its president, George Hay,...
Problem 10-16A Using present value techniques to evaluate alternative investment opportunities Swift Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Swift Delivery recently acquired approximately $4 million of cash capital from its owners, and its president, George Hay, is...
Problem 10-16A Using present value techniques to evaluate alternative investment opportunities Swift Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Swift Delivery recently acquired approximately $4 million of cash capital from its owners, and its president, George Hay, is...
Stuart Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Stuart Delivery recently acquired approximately $5.7 million of cash capital from its owners, and its president, George Hay, is trying to identify the most profitable way to invest these funds....
Jordan Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Jordan Delivery recently acquired approximately $6.2 million of cash capital from its owners, and its president, George Hay, is trying to identify the most profitable way to invest these funds....
Vernon Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Vernon Delivery recently acquired approximately $7.0 million of cash capital from its owners, and its president, George Hay, is trying to identify the most profitable way to invest these funds....
Rundle Delivery is a small company that transports business packages between New York and Chicago it operates a fleet of small vans that move packages to and from a central depot within each city and uses a common carrier to deliver the packages between the Depot it's in the two cities. Rundle delivery recently acquired approximately 6.6 million of cash capital from its owners and his president George Hay is trying to identify the most profitable way to invest these...
Thornton Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Thornton Delivery recently acquired approximately $6.2 million of cash capital from its owners, and its president, George Hay, is trying to identify the most profitable way to invest these funds....
Jordan Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Jordan Delivery recently acquired approximately $5.9 million of cash capital from its owners, and its president, George Hay, is trying to identify the most profitable way to invest these funds....
Finch Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Finch Delivery recently acquired approximately $6.2 million of cash capital from its owners, and its president, George Hay, is trying to identify the most profitable way to invest these funds....