# Lasting Impressions Company

Submitted By shannonburton
Words 516
Pages 3
a. For each of the two proposed replacement presses, determine the following items:

(2) Operating cash inflows (Note: Be sure to consider the depreciation in Year 6.)
Operational Cash Inflows
Operational Cash Inflows

(3) Terminal cash flow (Note: This is at the end of Year 5.)

b. Using the data developed in Part A, find and depict on a timeline the relevant cash flow stream associated with each of the two proposed replacement presses, assuming that each is terminated at the end of five years.
\$128,400
\$662,000
\$182,160
\$166,120
\$167,760
\$167,400
\$191,760
\$359,160
Press A
\$87,600
\$361,600
\$119,280
\$96,160
\$85,680
\$121,200
\$85,680
\$206,880

Press B
0
0
1
1
2
2
3
3
4
4
5
5
\$128,400
\$662,000
\$182,160
\$166,120
\$167,760
\$167,400
\$191,760
\$359,160
Press A
\$87,600
\$361,600
\$119,280
\$96,160
\$85,680
\$121,200
\$85,680
\$206,880

Press B
0
0
1
1
2
2
3
3
4
4
5
5

c. Using the data developed in Part B, apply each of the following decision techniques: (1) Payback period (Note: For Year 5, use only the operating cash inflows.)

The acceptable payback period is determined subjectively by the manager.

Incorrect Calculations see below
Incorrect Calculations see below

(2) Net present value (NPV) (Incorrect calculations see below)
Press A NPV= \$128,400/1.14+\$182,160/1.142+\$166,120/1.143+\$167,760/1.144+\$191,760/1.145-\$662,000=\$-97,816

Press B NPV= \$87,600/1.14+\$119,280/1.142+\$96,160/1.143+\$85,680/1.144+\$85,680/1.145-\$361,600=\$-32,842

Neither choice is above 0 which makes both bad choices.

Corrections to NPV calculations. Adjust paper with these numbers
Press A

CF0 = -\$662,000, CF1 = \$128,400, CF2 = \$182,160, CF3 = \$166,120,

CF4 = \$167,760, CF5 = \$449,560

Set I = 14%

Solve for NPV = \$35,738.82

Press B

CF0 = -\$361,600, CF1 =...

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