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5. (20 points) Office Automation, Inc., is obliged to choose between two copiers, XX40 or RH45. XX40 costs less than RH45, but its economic life is shorter. The costs and maintenance expenses of these two copiers are given as follows. These cash flows are expressed in real terms. Copier Year 1 23 4 5 XX40 RH45 $700 $100 $100 $100 900 110 110 110 110 110 The inflation rate is 5% and the nominal discount rate is 14%. Assume that revenues are the same regardless of the copier, and that whichever copier the company chooses, it will buy the model forever. Which copier should the company choose? Ignore taxes and depreciation.
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Home nert Page Layout Formulas Data Review View dd-Ins Cut Σ AutoSum ー E ゴWrap Text aCopy в 1 프· ー· 鱼, Δ. :r-ㄧ 逻锂函Merge & Center. $, % , 弼,8 Conditional Format eCell Insert Delete Formsat Sort &Find & 2 ClearFe Select Edting Format Painter Formatting, as Table w styles. ▼ ㆆ ▼ Clipboard Alignment Number Cells U41 IT IV Ix IY lz JB JC ID 25 26 27 28 29 30 31 32 PV FACTOR AT 14% PV OF CFAT FOR XX40 PV OF CFAT FOR RH45 QFR XX40 RH45 1.0000 0.8772 0.7695 0.6750 0.5921 0.5194 700.00 87.72 76.95 -67.50 0.00 0.00 948.69 0 -700 100 100 100 110 110 110 110 110 900.00 96.49 84.64 74.25 -65.13 57.13 1316.99 4 34 35 36 37 38 39 NPV -408.64[.948.69/2.3216] -383.621-1316.99/3.4331] NPV/PVIFA@14%, 3 YEARS NPV/PVIFA@14%, 5 YEARS YEARLY COST OF OPERATING XX40-EAC = YEARLY COST OF OPERATING RH45 = EAC = RH45 HAS LOWER EAC GO FOR RH45 NOTE REAL CASHFLOW HAS TO BE DISCOUNTED WITH NOMINAL RATE 42 43 11 トト | EAC MACRS RATİON PBP ARR erences: JA35 external rate MlRR NPV İRR ( REPLACEMENT S (HPR GMAM RATIOCASHBUDGET C wacc BOND | EPS EBIT- REPLACEMENT- STats ! NPV 14 12:48 04-01-2019

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