Question

QUESTION 5 Clean Hands Solutions (CHS) can increase the production of their hand sanitizers if they invest in additional mixing equipment. It is expected that the net cash flow will Increment each year by $11,000. The required investment in additional investment including installation is $40,000. The foreseeable market conditions associated with these products will last for least 10 years. When the hand sanitizer demand is back to normal, it is expected the equipment can be sold for sold in the used industrial equipment market for $12,000. Compute the present worth of this project if the MARR is 9.3%.

Answer 1

Cashflow table

Year	0	1-10	10
Additional investment	(40,000.00)
Incremental net cashflow		11,000.00
Salvage value of equipment			12,000.00
Net cashflows	(40,000.00)	11,000.00	12,000.00
PV factor @ 9.3% --> For year 1 and 10 --> 1/(1+9.3%)^nth year; Year 1-10 annuity ---> (1-(1+9.3%)^-10)/9.3%	1.0000	6.3338	0.4110
PV of cashflows	(40,000.00)	69,671.53	4,931.51
NPV	34,603.04

Therefore present worth of the project is $ 34,603.04.

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