Hook Industries is considering the replacement of one of its old drill presses. Three alternative...
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Hook Industries is considering the replacement of one of its old drill presses. Three alternative replacement presses are under consideration. The relevant cash flows associated with each are shown in the following table. The firms weighted average cost of capital is 15%. Press An Press B Initial investment (CF0) $85,000 $60,000 Year (t) Cash inflows (CFt) 1 $18,000 $12,000 2 18,000 14,000 3 18,000 16,000 4 18,000 18,000 5 18,000 20,000 6 18,000 25,000 7 18,000 40,000 8 18,000 50,000 Required a. Calculate the net present value (NPV) of each press. b. Using NPV, evaluate the acceptability of each press. Assume: the press are mutually exclusive
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