scenario matys S Automated Food Desmb ton Corp CAF C produce

scenario matys S Automated Food Desmb ton Corp CAF C produces verd g machr es and places ? er n Dubic buidngs The company has ottanee permsson to place one of ts mac ne ra ocal library Th* company makes two types of machines one disttutes soft drinks and the other distroutes snack foods AFDC expects both machr es to pro de benems over a Byear penod and each has a recured nvestment of 52.970 The Sm uses a 9 5% oost of capital Management h constructed the tollowing table of estimates of annual cash infhows for pessimistic most ly and optimistic nesults (Click on the loon locaned on the top-ignt coner of te data table below in onde to copy its contents into a spreadsheet) Soft drinks Snack foods 700 1,160 vending machines . Determine the ange of annudl cash infiows for each of the b b. Construct a table of the NPVs associated with each outcome for Find the range of NPs and subjectively compare the risks assocaned with these machines a\" The fange of annual cash ifows torte s tank machine is found tothe nearest dolar > The range of annusl cash infows for the snack foods machine isRound to the neeres a b.Complete ge tov table below forth, soft drink machine Round to nearest cent) Most ely Complene the NPV tabie belo for the snack foods machine(Round to the neaest cent)

Solution

Working Notes Soft Drinks Pessimistic Year Amount PVAF@ 9.5% Present Value Cash outflow 0 2970 1 2970.00 Cash inflow 1-8 480 5.433 2607.84 NPV -362.16 Most Likely Year Amount PVAF@ 9.5% Present Value Cash outflow 0 2970 1 2970.00 Cash inflow 1-8 700 5.433 3803.10 NPV 833.10 Optimistic Year Amount PVAF@ 9.5% Present Value Cash outflow 0 2970 1 2970.00 Cash inflow 1-8 1050 5.433 5704.65 NPV 2734.65 Snack Foods Pessimistic Year Amount PVAF@ 9.5% Present Value Cash outflow 0 2970 1 2970.00 Cash inflow 1-8 420 5.433 2281.86 NPV -688.14 Most Likely Year Amount PVAF@ 9.5% Present Value Cash outflow 0 2970 1 2970.00 Cash inflow 1-8 700 5.433 3803.10 NPV 833.10 Optimistic Year Amount PVAF@ 9.5% Present Value Cash outflow 0 2970 1 2970.00 Cash inflow 1-8 1160 5.433 6302.28 NPV 3332.28 Answer (1) Range of Annual Cash Inflows for Soft Drink Machine. $2607.84 - $5704.65 Range of Annual Cash Inflows for Snack Food. $2281.86 - $6302.28 Answer(2&3) Outcome Soft Drink Snack Food Compare Pessimistic -362.16 -688.14 No need to invest in these two as there is negative NPV Most Likely 833.1 833.1 Both have equal NPV so both are similar to invest Optimistic 2734.65 3332.28 Snack food is good in this case as higher NPV then Soft drink