Unequal lvesANPV approach JEL Co has designed a new convayor

Unequal lves-ANPV approach JEL Co has designed a new convayor system. Managemant must choose among three aternative courses of action (1) The fim can sell the design outright to another corporaion with payment over 2 years. (2)can ice sens desig toanother man tactuer fo ape od of 5 years tsikely product iteanca, manufacture and market the trnem eset er at ve a esut ih 6 years of cash tes Trecomoeny has a cost of castw of 1l4%Cashton associated with each aternative are as shown in the following table. (Click on the lcon located on the top-right cormer of the data table below in order to copy its contents into a spreadsheet) 249.100 9,500 39400 ?. Tho net present vuln for the option to see dRound to ?-nearest cent > The net present value for the option to icense is sRound to the nearest cent The net present vale for the opon to manufacturei(Round to the mearest cent) Rank the projects below (Select from the drop-down menus) First Option to Second Option to Thind Option to , The A\'?\'for the option to sel (Round to the nearest cert )

Solution

In case of Sell Year Amount P V Factor@ 11.4% Present Value Cash outflow 0 200900 1 200900.00 Cash inflow 1 200600 0.898 180071.81 Cash inflow 2 249100 0.806 200725.87 NPV 179897.68 In case of license Year Amount P V Factor@ 11.4% Present Value Cash outflow 0 200000 1 200000.00 Cash inflow 1 250700 0.898 225044.88 Cash inflow 2 99300 0.806 80016.37 Cash inflow 3 79500 0.723 57505.79 Cash inflow 4 59900 0.649 38894.31 Cash inflow 5 39400 0.583 22965.20 NPV 224426.56 In case of Sell Year Amount P V Factor@ 10% Present Value Cash outflow 0 450300 1 450300.00 Cash inflow 1 199000 0.898 178635.55 Cash inflow 2 255000 0.806 205480.11 Cash inflow 3 199000 0.723 143945.30 Cash inflow 4 199000 0.649 129214.82 Cash inflow 5 199000 0.583 115991.76 Cash inflow 6 199000 0.523 104121.86 NPV 427089.40 Rank of projects SELL 3rd LICENSE 2nd MANUFACTURE 1st Adjusted NPV of option to Sell NPV * PVAF(11.4% , 2) 179897.89*1.7034 = 306450.3