# Evaluating_Cherone_Equipment_Risky_Plans_for_Increasing_Its_Production_Capacity

May 1st, 2015
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Plan X YearCFPVIF12%,nPV; Plan X YearCFPVIF13%,nPV; Plan Y YearCFPVIF15%,nPV

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Evaluating Cherone Equipment's Risky Plans for Increasing Its Production Capacity1.Plan XYearCFPVIF12%,nPV1 470,0000.893 419,7102610,0000.797486,1703950,0000.712676,4004970,0000.636616,92051,500,0000.567850,5003,049,700NPV=CF1/(1+k)1 + CF2/(1+k)2 + CF3/(1+k)3 + CF4/(1+k)4 + CF5/(1+k)5 CF0Calculator solution = 349,700NPV = 3,049,700 - 2,700,000NPV= 349,700IRRX = 16.22%Plan YYearCFPVIF12%,nPV1 380,0000.893 339,3402700,0000.797557,9003800,0000.712569,6004600,0000.636381,60051,200,0000.567680,4002,528,840 NPV= CF1/(1+k)1 + CF2/(1+k)2 + CF3/(1+k)3 + CF4/(1+k)4 + CF5/(1+k)5 CF0Calculator solution = 428,968.70NPV= 2,528,840 - 2,100,000NPV= 428,840IRRY = 18.82%Both NPV and IRR are better for Project Y. The NPV and IRR are higher.2. Plan XYearCFPVIF13%,nPV1 470,0000.885 415,9502610,0000.783477,6303950,0000.693658,3504970,0000.613594,61051,50

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