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Toronto Shakespearean TheaterToronto Shakespearean TheaterSolu

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Toronto Shakespearean Theater
Toronto Shakespearean Theater
Solution
The table is as below:
Explanation for the above table:
PV of future cashflows = annuity discount factor * 27,000.
For example, for rate of 8%, this is equal to 5.747 * 27,000
= 155,169.
NPV = PV of future cashflows - initial investment. For
example, for rate of 8%, this is equal to 155,169 - 129,750
= 25,419.
Calculation of minimum savings
To justify replacement, initial investment = annuity
discount factor * minimum savings
Here, annuity discount factor = 4.968 for hurdle rate of
12%
So 129,750 = 4.968 * minimum savings
So Minimum savings = 129,750 / 4.968 = 26,117.15
Answer: Minimum savings = $ 26,117.15
Hope this helped ! Let me know in case of any

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Toronto Shakespearean Theater Toronto Shakespearean Theater Solution The table is as below: Explanation for the above table: PV of future cashflows = annuity discount factor * 27,000. For example, for rate of 8%, this is equal to 5.747 * 27,000 = 155,169. NPV = PV of future cashflows - initial investment. For example, for rate of 8%, this is equal to 155,169 - 129,750 = 25,419. Calculation of minimum savings To justify replacement, initial investment = annuity discount factor * minimum savings Here, annuity discount factor = 4.968 for hurdle rate of 12% So 129,750 = 4.968 * minimum savings S ...
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