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[EXCEL] Net present value: Blanda Incorporated management is considering investing in two alternative production systems. The...

[EXCEL] Net present value: Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9 percent discount rate for production system projects, in which system should the firm invest?

Year    System 1         System 2

0          −$15,000        −$45,000

1          15,000            32,000

2          15,000            32,000

3          15,000            32,000

[EXCEL] Payback: Refer to Problem 5. What are the payback periods for production systems 1 and 2? If the systems are mutually exclusive and the firm always chooses projects with the lowest payback period, in which system should the firm invest?

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jeff jeffy answered 2 years ago
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