Homework Answers
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| A Company | ||||||
| Particulars | Y0 | Y1 | Y2 | Y3 | Y4 | Total |
| Initial Investment | 860,000.00 | - | - | - | - | 860,000.00 |
| Salvage Value | - | - | - | - | (250,000.00) | (250,000.00) |
| Equipment replacement cost | - | - | 300,000.00 | - | - | 300,000.00 |
| Annual operating cost | - | 910,000.00 | 910,000.00 | 910,000.00 | 910,000.00 | 3,640,000.00 |
| Total Cash flows | 860,000.00 | 910,000.00 | 1,210,000.00 | 910,000.00 | 660,000.00 | 4,550,000.00 |
| PV factor @ 10% | 1.00 | 0.909 | 0.826 | 0.751 | 0.683 | |
| PV of cash flows | 860,000.00 | 827,272.73 | 1,000,000.00 | 683,696.47 | 450,788.88 | 3,821,758.00 |
| Final Answer | Amount $ | |||||
| Net present value | 3,821,758.00 | |||||
| Annuity factor for 4 years | 3.17 | |||||
| Equivalent annual worth | 1,205,653.07 |
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