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Year Standard Equipment CAM Equipment $(500,000) $(2,000,000) 300,000 100,000 200,000 200,000 100,000 300,000 100,000 400,000...

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Accounting

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Year Standard Equipment CAM Equipment $(500,000) $(2,000,000) 300,000 100,000 200,000 200,000 100,000 300,000 100,000 400,000 100,000 400,000 100,000 400,000 100,000 500,000 100,000 100,000 1,000,000 1,000,000 1,000,000 100,000 Assume that Fabre's cost of capital is 14%. Required: 1. Calculate the NPV of each alternative by using the 14% rate. Standard equipment C CAM equipment 2. Conceptual Connection: Now assume that if the standard equipment is purchased, the competitive position of the firm will deteriorate because of lower quality (relative to competitors who did automate). Marketing estimates that the loss in market share will decrease the projected net cash inflows by 50% for years 3 through 10. Recalculate the NPV of the standard equipment given this outcome

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