Chat with us, powered by LiveChat Air Scrubbers? Furnace Fuel Change Initial Investment ??$ ?????1,350,000 ???$ ???????1,385,000 ?? Annual Net Cash Flows ??$ ????????225,000 ???$ ??????????315,000 ?? Annual Net Income ? | Wridemy

Air Scrubbers? Furnace Fuel Change Initial Investment ??$ ?????1,350,000 ???$ ???????1,385,000 ?? Annual Net Cash Flows ??$ ????????225,000 ???$ ??????????315,000 ?? Annual Net Income ?

  Air Scrubbers 

Furnace Fuel Change
Initial Investment   $      1,350,000    $        1,385,000   
Annual Net Cash Flows   $         225,000    $           315,000   
Annual Net Income   $         135,000    $           150,000      
Project Life   15 years   15 years  
Average Book Value   $         675,000    $           692,500   
Cost of Capital   6%   6%  

Part 1 – Capital Budget

Instructions: Your Instructor will provide the numerical data of the required investment, annual cash flows, annual net income, average book value, and cost of capital to students. Use that information to calculate the NPV, payback, IRR, and ARR by filling in the highlighted cells. Additionally, use the IRR Worksheet to calculate the IRR using the Excel =IRR formula.
Air Scrubbers
IRR Worksheet
Air Scrubbers Furnace Fuel Change Period Cash Flow
0 -1350000
Net Present Value using the Annuity Table to determine PV of cash flow Net Present Value using the Annuity Table to determine PV of cash flow 1 225,000
NPV = Initial Cost + (Net Annual Cash Flow × Factor) Amount Factor Present Value NPV = Initial Cost + (Net Annual Cash Flow × Factor) Amount Factor Present Value 2 225,000
Initial investment $ (1,350,000) 1 $ (1,350,000) Initial investment $ (1,385,000) 1 $ (1,385,000) 3 225,000
PV of Annual net cash flow for 15 years 225,000 -1350000.00 (843,744) PV of Annual net cash flow for 15 years $ 315,000 1.00 152,369 4 225,000
Net present value $ (2,193,744) Net present value $ 1,232,631 5 225,000
OR OR 6 225,000
Net Present Value Using Excel to determine PV cash flow Net Present Value Using Excel to determine PV cash flow 7 225,000
NPV = Initial Cost + PV of Cash Flow Present Value NPV = Initial Cost + PV of Cash Flow Present Value 8 225,000
Initial investment $ (1,350,000) Initial investment $ (1,385,000) 9 225,000
PV of Annual net cash flow for 15 years =PV(rate,value1,[value2]) 375 PV of Annual net cash flow for 15 years =PV(rate,value1,[value2]) (3,059) 10 225,000
Net present value $ (1,349,625) Net present value 11 225,000
$ (1,388,059) 12 225,000
Payback Period = Initial Investment / Net Annual Cash Flow Payback Period = Initial Investment / Net Annual Cash Flow 13 225,000
14 225,000
-3603.1252129469 452.7092954861 15 225,000
14.01%
Internal Rate of Return Internal Rate of Return
Using Annuity Table 9.71% Using Annuity Table 9.71% Furnance Fuel Change
OR OR IRR Worksheet
Using Excel =IRR(M6:M21) use the IRR worksheet 14.10% Using Excel =IRR(M26:M41) use the IRR worksheet 21.52% Period Cash Flow
0 -1385000
Average Rate of Return = Ave Net Income / Ave Book Value of investment Average Rate of Return = Ave Net Income / Ave Book Value of investment 1 315,000
2 315,000
0.2 0.216 3 315,000
4 315,000
5 315,000
6 315,000
7 315,000
8 315,000
9 315,000
10 315,000
11 315,000
12 315,000
13 315,000
14 315,000
15 315,000
21.52%

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© 2022 Walden University, LLC Page 1 of 1

Week 6 Assignment Data

Air Scrubbers Furnace Fuel Change

Initial Investment $ 1,350,000 $ 1,385,000

Annual Net Cash Flows $ 225,000 $ 315,000

Annual Net Income $ 135,000 $ 150,000

Project Life 15 years 15 years

Average Book Value $ 675,000 $ 692,500

Cost of Capital 6% 6%

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